A west coast non-profit healthcare provider riding the waves of the ever changing guaranteed cost market saw it workers’ compensation costs surge to the second largest operational expense for the firm. The Insured had looked at traditional large deductible plans in the past but had an aversion to tying up its working capital with letters of credit or dealing with the volatility of cash collateral arrangements involving loss development factors.


Wide swings in California premium rates made it nearly impossible for the Insured to effectively budget for this significant expense. Further, while the traditional market pushed the client towards a large deductible plan, the Board of Directors was becoming concerned that their negative trend in charitable donations would make a deferred cash flow plan unpalatable. End result, the broker was charged with finding a plan that combining the “safety” of guaranteed cost and the economic benefits of loss sensitive.


The broker contacted Keystone Risk Partners (KRP). After several educational meetings with the customer on alternative methods to finance insurance risk, the client was prepared to explore a unique alternative. KRP developed an unconventional large deductible contract designed to seek reimbursement from an underlying second policy called a Deductible Protection Policy (DPP). The DPP, supported by a sponsored captive facility, provided access to the underwriting profit and investment income and satisfied the collateral requirements of the carrier. This two policy structure allowed the client to fix their annual cash flow, reinvest substantial underwriting profits to simplify their budgeting process going forward and access a tailored risk mitigation program to gain control over the financial decisions involving claims.