An East Coast trade contractor was looking to the alternative market for a tailored insurance solution. The company was purchasing guaranteed cost insurance, but it had all of the attributes of a cost-plus buyer: casualty lines premium of $1M+, solid safety program, proactive claims handling, and a historically low loss ratio. They were ready to move to the risk/reward world, they were just looking for the right partner.


Much of the contractor’s insurance costs were reimbursed by third parties. Moving to a large deductible or retro would make it extremely difficult to seek reimbursement for a guaranteed cost equivalent. In addition, the company CFO was concerned that moving to a cost-plus structure would significantly decrease the dollars eligible for premium deductibility. Lastly, the owner of the business was adamant that the business know each year’s maximum liability (worst case scenario).


The insured’s broker contacted Keystone Risk Partners (KRP) to explain the situation, and a solution was achieved by using a two policy structure, a Large Deducible Policy and a Deductible Reimbursement Policy. The combination of the two allowed the contractor to evidence a guaranteed cost premium for reimbursement. Based on the company profile of the contractor as well as the amount of funding into the Deductible Reimbursement Policy, the CFO was satisfied with his ability to achieve premium deductibility similar to guaranteed cost. Because the program parameters included insurance protection for any one loss (specific) as well as the sum total of all losses (aggregate), the owner knew day one the company’s ultimate liability.