| |
| |
|
|
Insurance Information |
|
Alternate Risk Transfer (ART) - Insurance Strategies
Risk Management Alternate Risk Transfer is a fancy way of saying alternate methods of insurance and risk management, of which there are many. From the most basic alternative of going without insurance (self-insuring) to so-called "program business captives", there are a wide variety of strategies from which to choose. To understand why ART strategies are so popular it is important to understand a few facts about insurance pricing. ►Insurance Premiums are related primarily to economic cycles NOT primarily to claims. "The claims that recent increases in medical malpractice liability insurance premiums in Connecticut are attributable to overly generous jury verdicts are unfounded. The more likely explanation for the sudden rise in rates is the decrease in investment earnings of the medical malpractice insurers?" Professor Tom Baker, Director, Insurance Law Center, University of Connecticut School of Law Every time insurance industry profits decline sharply, the industry declares an "insurance crisis" - rates go up sharply, deductibles rise and underwriting guidelines tighten. ►Insurance Premiums have risen much faster than claims. Median medical malpractice payments rose 35 Percent from 1997 to 2001 (an average of 8.5% a year). Average premiums for single health insurance coverage increased 39 percent over that time period (9.5% per year). (Source: National Practitioner Database) ►A small number of insured may be responsible for a large percentage of losses. National Practitioners Database: For example, in Florida, 6% of the doctors were found to be responsible for 51% of the malpractice claims. 2,674 out of 44,747 doctors have paid two or more malpractice payments. These doctors are responsible for 51% of total malpractice payments. 24 Florida physicians have paid 10 or more malpractice settlements since 1990. Needless to say, the 94% pay for the poor claims experience of the 6%. ART Strategies Conventional insurance markets are one-year indemnity contracts designed to transfer specific hazard risks. Typical features of an ART strategy are: ►Multi-year, multi-line coverage ►Coverage tailored to special need of insured ►Provides coverage not generally available in the marketplace ►Risk retention by insured There is a multifarious trade-off between risk retention, complexity and cost among the various different ART strategies. Not surprisingly, the plans with the least risk, complexity and expense generally provide the least benefit. As more risk is retained, the greater and greater benefits can be obtained. Of course, complexity and administrative expenses grow as well. Windward Harbor can help you find, execute and manage the right strategy for you. We have listed the basic ART strategies below. ►Guaranteed Cost Insurance Plans Traditional insurance coverage. ►Loss Sensitive Insurance Plans Insurance coverage for a specific insured where the final premium is based on the insured's losses. ►Risk Purchasing Groups (RP's) Risk Purchasing Groups were created by the Liability Risk Retention Act of 1986. The purpose of the act was to break through the myriad of state insurance regulation in the hopes of making it easier for groups to purchase liability insurance. The act allows groups of individuals combine to purchase liability insurance while prohibiting states (regulators) or insurance companies from discriminating against them. ►Self-Insured Retention Plans (SIRS) The primary difference between a deductible and a self-insured retention is that a deductible amount counts against the total limits of the policy, reducing total coverage, whereas a self-insured retention plan provides limits of coverage in excess of the self-insured retention so that the amount payable under the policy is not reduced by the amount of the retention. ►Protected Cell Captives (Segregated Portfolio Companies) PCCs (SPC's in certain domiciles) are essentially rent-a-captive companies that ensure complete separation among program participants. According to the laws of specific domiciles, PCCs or SPC's generally guarantee complete separation of each cell's assets, capital, and surplus from each other. Because they can achieve economies of scale, rent-a-captives make captive insurance affordable for companies that would not otherwise be large enough to profitably own and operate their own captive. Windward Harbor LLC owns a BVI licensed Segregated Portfolio Company - Windward Harbor SPC Ltd, which provides rent-a-captive services for selected clients on an annual fee basis. Each segregated portfolio has its own economic ownership, tax Id number and files a separate tax return. ►Self-Insured Groups & Pools (SIG's) While the concept differs slightly from state to state, SIGs work similarly in the nearly 40 states in which they are legal. A group of employers form a nonprofit corporation or trust and hire a professional to manage it. This new entity then purchases the insurance, meaning the SIG members essentially "own" their own workers' comp company. The group pools the money it otherwise would pay an insurer, earning investment income on funds held in reserve. If a SIG program cuts down on workplace injuries and claim costs, the surplus, or "dividend," from premiums is returned to members. Of course, if a company or the group as a whole has catastrophic losses, members pay the difference, up to a limit. Above that point, the group buys excess insurance to offset a single large loss or a combination of losses. ►Captives (See Captive Services) A captive insurance company is an insurance company that is owned and controlled by its insureds. According to Captive Insurance Companies Association (CICA), the first captive ever formed was in the late 1800s, and was designed to write more cost effective fire insurance policies for New England textile manufacturers that were hit hard by increasing market rates. Captives gained popularity in the 1980s as a result of the US liability crisis, particularly in the medical arena. As captives have continued to grow over time, employers are considering employee benefits as a new or expanded coverage. The more recent hard market and changing economy is expected to spur even more and rapid industry growth yet this year. Single Parent (Pure) Captive: A single parent captive is owned and controlled by one owner, typically the parent organization, and is formed as a subsidiary company. The captive subsidiary underwrites policies for the parent, and solely bears the risks of the parent. ►Group Captive: A group captive is owned and controlled by multiple insureds. They may or may not be related entities or a part of a homogeneous group like industry or trade groups. Typically, companies of similar size pool their risks in an industry captive with customized insurance plans. Similarly, companies of similar size in different industries can also form group captives to enjoy the benefits of a captive model. More recently, associations have been forming association captive insurance companies to offer captive services as part of their membership benefits. ►Agency Captive: Agency captives are companies typically owned by groups of brokers or other insurance intermediaries and are typically structured like rent-a-captives. ►Risk Retention Groups Risk Retention Groups were also created by the Liability Risk Retention Act of 1986, which provides for streamlined regulation. A RRG is an insurance company in every regard but has one very important regulatory distinction. Every RRG chooses a single state in which to be domiciled and regulated. The act provides that the RRG is then eligible to do business in all states. ►Program Business Captives Associations, regional producers and corporations who desire to assume some selected third-party exposure. Wayne Walker, Windward Harbor Insurance Management LLC �Windward Harbor LLC 2004 Windward Harbor Insurance Management LLC is a licensed insurance manager in the British Virgin Islands with office in Pinehurst, NC, Atlanta, GA, and St Petersburg, FL.
MORE RESOURCES:
Insurance - Google News |
|
|
|
RELATED ARTICLES
Insure Your House When we talk about insurance the thing you have to remember is that always the price of your house must be higher then the value of the mortgage. This is not a hard thing to take care of if you like your house and care about the quality of your life. Choosing Buy-To-Let Property Insurance Risk is an area often overlooked by landlords, but failing to protect the main assets of your business, which often have borrowings secured against them could lead to ruin.Landlords often fail to understand the types of insurance risks that they are exposed to and are unaware that insurance coverage for buy-to-let investments is very different to the standard household insurance policies that cover owner-occupied dwellings. Japanese Overseas Travel Insurance If you are an expatriate planning on long-term residence in Japan you can, after a one-year stay, become a part of Japan's national health program. Until that time, however, you're going to need Japanese overseas travel insurance. Tips On How To Save When Buying Car Insurance If you want to save money when you purchase your car insurance here are a few ways that can help you as you search for auto insurance.First thing you can do is comparison shop. State Farm Auto Insurance - Heres A Few Factors That Determine Your Rate There are many factors that affect the insurance rate you receive from State Farm Auto Insurance. Various types of coverage are available depending on the price of the vehicle you buy. Choosing Affordable Health Insurance For Children In most cases, private health insurance comes through a person's employer, who picks up the majority of the cost of premiums. However, today many people, who are either self-employed or who work for a company that doesn't offer health insurance, find it necessary to obtain quality affordable health insurance for children. Sleep-At-Night Coverage With A Private Health Insurance ( Affordable Health Insurance ) Health Insurance: a sense of dissatisfactionThe three C's, customization, consumerization and customer-satisfaction, seem to be at the core of the business mantra for every service provider. The health insurance provider industry is no exception to this rule. Term Life - Who Needs It? If you've read any of the books or articles by popular personal finance gurus you've probably heard of the affordable life insurance alternative called Term life. Term life insurance Quotations are recommended by many popular personal finance gurus and can be a good choice for:� Young families or those on a limited budget, yet still need a large amount of life insurance. Finding Auto Insurance Comprehensive Coverage You can go online to easily find and quote auto insurance comprehensive coverage.The definition could include basically (2) trains of thought. Tips For Lowering Your Auto Insurance Quote Do you have many claims? If so, you should do all you can to reduce them or even endeavor to file no claims at all. Why do I bring this issue up in an article about lowering your auto insurance quote? Because the number of claims is the single factor that to the highest degree influences the cost of your insurance premium. Auto Insurance Basics Most people only think that insurance is something they need so they can get their registration and tag so they can drive. It is something that they need because their license will be suspended if they don't get it. All Auto Insurance is Not Created Equal! Contrary to what you may have heard all auto insurance is not created equal. A quick search on the net will quickly reveal different rates, different policies, and different terms, so how is one to sort through all the clutter. Auto Insurance Rates Auto insurance rates will vary depending on the insurance agency, your driving record, and the type of insurance you are looking to purchase. I you are looking for affordable car insurance or truck insurance then read on. Life Insurance Benefits Life Insurance is a legal contract between you and a life insurance company with the purpose of providing an income to spouse, children or other beneficiaries in the event of your death.There are two different categories of Life Insurance. Why Would I Need Auto Insurance Specialists? If you do not understand the way that auto insurance works, you really need to deal with auto insurance specialists. These are the agents that work for the insurance companies and they can answer any questions you might have. 10 Tips to Save on Healthcare Insurance Americans shopping for their own healthcare insurance can substantially cut premiums by following 10 simple steps, according to leading insurers.Answer Financial Inc. Auto Owners Insurance - Do You Really Need It? If you think you don't have any need for auto owners insurance, just consider the answer to this question. How would you manage to pay the medical bills of someone who gets hurt in an accident when you are at fault? If you do not have an unending supply of money, then you definitely need auto owners insurance. Senior Life Settlements- A New Financial Dawn Emerges When delving deeper into the market-driven research on the myriads of reasons, motivations, and/or rationales for senior life settlements - seniors selling their life insurance policies have surfaced in recent years. According to studies by key industry players, policyholder rationales for selling life policies are to be identified on one of three levels, due to a combination of them OR influencers from all three levels working together to result in senior life settlement transactions:Individual: cash-need for major expenses, outlived need for coverage, needing different coverage or features, financial distressFamily / Estate: Change in beneficiaries (e. Life Insurance Settlement A new financial tool is now available for senior citizens. Life Insurance Settlements are quickly becoming a way for seniors to receive money from an under performing or costly life insurance policy. Is Life Insurance Comparison Really Necessary? When you want to purchase a life insurance policy, you really do need to do a life insurance comparison. This is to ensure that you get the best possible rates and the best possible life insurance for your needs.
|
||||||||||||||||
