Medical Expense Stop Loss insurance is a smart and economical way to lower costs and improve employee health insurance. Currently available only for employers with 50 or more insured employees.

1. ==== ====
A great way to provide group health insurance to 50 or more employees!
http://www.captiveinsurance.info/Health/health.html
==== ====
The insurance agent has been given very little exposure to and education in the world of
reinsurance. Most agents only become aware of reinsurance when an insurance company
underwriter tells the agent that they cannot write that risk because our insurance company's treaty
reinsurance agreements prevent us from writing that type of business.
Since reinsurers over the years have been the traditional risk-taking company, their influence in
determining underwriting philosophy for primary insurers has grown significantly. Many reinsurers
today, because they are taking a larger amount of exposure on a particular insurance company's
individual risk, now dictate the primary pricing, the amount of the deductible, the amount of the
credit or debit. Reinsurers now have to know a great deal more about the primary insurance
business.
The agent should consider the purchase of a reinsurance program for its agent-owned captive
insurance company. Many of the approaches to buying reinsurance are similar to what a
traditional insurance company uses. The agent needs to be familiar with the various types of
reinsurance:
1.Quota Share Reinsurance
2.Excess of Loss Reinsurance
3.Catastrophic Reinsurance
4.Aggregate Excess of Loss Reinsurance
5.Stop Loss Reinsurance
6.Finite Risk Reinsurance
Although the capital requirements for starting agent-owned captive insurance companies,
particularly those in the offshore domiciles, are comparatively small, careful consideration should
be paid to the structure of a comprehensive reinsurance program. Gone are the days when
aggregate stop loss reinsurance could be easily ascertained to guarantee underwriting profits for
the agent-owned captive.
Bearing this in mind, the net retention of the agent-owned captive should be compared to its
financial structure and the agent owner's risk taking philosophy. Most agent-owned captive
insurance companies operating today have too great a new retention when contrasted with
traditional insurance companies, and also taking into consideration their financial structure.

2. Whether the agent-owned captive purchases only quota share reinsurance or uses a combination
of several types of treaty reinsurance agreements, the reinsurance program must be monitored
and consistently evaluated. The degree of difficulty increases dramatically when designing a
reinsurance program for a newly formed agent-owned captive insurance company.
Reinsuring the Policy-Issuing Company
with Your Agent-Owned Captive
A policy-issuing arrangement in your agency-whether it be a retail agency, wholesale agency, or
managing general agency-is when a policy is issued by a licensed property/casualty insurance
company, whether admitted or non-admitted. Then it is reinsured up to 100% by the traditional
reinsurance company market that would include the agent-owned captive insurance company.
This type of arrangement is sometimes referred to as "fronting" and is almost always used when
the agent has formed an agent-owned captive.
The policy-issuing company is paid a "fronting fee," and is reinsured 100%. Some
property/casualty insurance companies have had as their franchise model offering their "A" rated
carrier as a "frontier," thus transferring underwriting risk for financial risk. Fronting companies must
consider state premium takes, residual mods, government schemes and assessments, and that is
why the agent needs to be trained in negotiating a fronting fee. Experience with this type of fee
shows that the pure profit margin on a fronting fee can vary from 3% to 7.5% depending upon the
fronting insurer.
For example: An agent-owned captive insurance company operating in the Florida restaurant
insurance marketplace reinsures the first $75,000 of underwriting loss behind the policy-issuing
company. In addition, the reinsurer also owned by the same financial group that the policy-issuing
belongs to, writes the excess of loss reinsurance above $75,000 up to $500,000, at a rate of
17.5% of GNWPI. The excess of $500,000 up to $1,000,000 of limit for the restaurant program has
another rate, as a percentage of gross net written premium income. The reinsurer is a direct
writing reinsurer, and negotiates its excess of loss treaty reinsurance agreement directly with the
policy-issuing insurance company, since they also have other treaty reinsurance agreements in
place with each other, none of which has to do with the agent-owned captive insurance company.
To have a successful agent-owned captive insurance company, the agent has to understand the
negotiating process when buying reinsurance either in the direct reinsurance market or through
the reinsurance intermediary market. The agent will also get a better understanding why the
underwriting cycles exist in the property/casualty insurance industry, and be able to take
advantage of these underwriting cycles. When policy-issuing insurance companies take very little
underwriting risk, and the actual underwriting risk is transferred to the traditional reinsurance
market (as well as the agent-owned captive insurance company), the agent will begin to need to
negotiate with reinsurers.
Using Quota Share Reinsurance Provided
Only by the Agent-Owned Captive
Here is another example: The Cayman Island agent-owned captive insurance company originally
started to write horse mortality insurance, and was capitalized substantially by a bank, using the

3. collateral of the agency. On the basis of this substantial capitalization, the agent-owned captive
was able to write 100% of the quota share reinsurance of the policy-issuing insurance company.
Policies originally written in the agency were issued in the policy-issuing insurance company,
100% reinsured to the agent-owned captive, who in turn purchased an outgoing going reinsurance
program, consisting of a combination of quota share reinsurance and excess of loss reinsurance.
The accumulation of profits in the Cayman Island agent-owned captive insurance company was
used to purchase a "shell" property/casualty insurance company which went on to be an "A" rated
specialty niche program insurance company after several stock offerings.
Conclusion
The owner of a retail insurance agency (i.e., program administrator) the owner of a wholesale,
excess and surplus lines insurance agency, and/or the owner of a managing general agency need
to explore the feasibility of implementing an agent-owned captive insurance company. Recapturing
investment income and underwriting profits gives the agent-owner significant returns on
investment.
About this Author
by
Andy Barile, CEO
Andrew Barile Consulting Corporation, Inc.
Rancho Santa Fe, California 92067
http://www.abarileconsult.com
Andrew Barile Consulting Corporation, Inc.
Insurance and Reinsurance Consultants
Andrew J. Barile, MBA, CPCU
President / CEO
P.O. Box 9580 • Rancho Santa Fe, CA 92067
abarile@abarileconsult.com
Tel: 858-759-5039 • Cell: 619-507-0354 • Fax: 858-759-8436
http://www.abarileconsult.com
Article Source:
http://EzineArticles.com/?expert=Andrew_Barile

4. ==== ====
A great way to provide group health insurance to 50 or more employees!
http://www.captiveinsurance.info/Health/health.html
==== ====