2. What is a Group Captive?
A reinsurance company owned by its
stockholders/policyholders
Proven method for managing risk
Insurance with a predefined best case and
worst case (risk/reward)
3. What a Group Captive is Not
Self Insured Group
There is no “Joint and Several Liability”
exposure
A solution for companies with excessive
claims
4. Benefits of Group Captives
Complete transparency
• Know where every penny of every dollar
is spent
The ability to control costs of insurance
• Workers’ Comp, Liability & Auto
Reduced Premiums over time
AND……
5. The Greatest Benefit of a Group
Captive
The ability to turn the expense of insurance
into an asset
Dividends are paid with unused premium
Can be returned to the company or
stockholders
7. Captive Structure
Premium
Operating costs
Claims Fund (“A” Fund and “B” Fund)
Operating costs
Insurance policy, re-insurance, claims
management, loss control, captive
management
8. Captive Structure, con’t.
Claims Fund = “A” Fund and “B” Fund
“A” Fund $0-$125,000
Frequency layer
75% of total Claims Fund
“B” Fund $125,000-$350,000
Severity layer
Risk sharing layer
25% of total Claims Fund
9. Best Case vs. Worst Case
Best Case:
No claims; pay Operating Costs only
Worst Case:
Pay Operating Costs
+ “A” Fund
+ “B” Fund
+ Additional “A” Fund
10. Claims & Premiums
Transparency ($300k premium example)
Operating Costs
$117,000
Claims Fund
$183,000
“A” Fund $135,000
“B” Fund $ 48,000
39% 61%
11. Example of Earning Equity
(Claims Fund of $183,000)
Paid claims
•Year 1: $ 25,000
•Year 2: $1,000,000
•Year 3: $ 10,000
•Year 4: $ 25,000
•Year 5: $ 50,000
Equity
•Equity Retained: $158,000
•Equity Retained: ($0)
•Equity Retained: $173,000
•Equity Retained: $158,000
•Equity Retained: $133,000
For any one year:
Premium Minimum Cost: $117,000
Premium Maximum Cost: $435,000
Total Equity in 5 years:
$622,000
12. Year 2 Assessment Example
“A” Fund assessment $135,000 (pd quarterly)
50% paid 1st
year after assessment
30% paid 2nd
year after assessment
20% paid 3rd
year after assessment
In the conventional market, your ex mod would rise 52
points for three years at a cost of $153,000 a year, or
$495,000!
16. Captive Membership Cost
One-time Capitalization
$35,900 Preferred Share, $100 Common
Share
Collateral (2x your “A” Fund)
Cash Security, letter of credit, or
combination
* Capitalization, cash security, and premium
earn interest income
17. What sets Owen-Dunn Apart?
More than a decade of experience working
with alternative risk programs
Access to more than 30 alternative risk
programs
Have placed more than 100 clients into
alternative risk programs
Our agency’s single largest focus