Who Benefits?

Manufacturing Firm looking for more control over claims to reduce costs.

Unwilling to move to commercial large deductible plan due to LOC requirements and fear of large loss volatility.

Keystone hybrid large deductible plan using a captive to finance deductible.

• Paid loss volatility transferred to the captive through payment of premium.
• Total cash flow requirements were similar to current GC premiums.
• Captive satisfies collateral/ LOC requirements in a tax efficient manner.
• Insured reduces cost through greater control over claims and accessing the resulting underwriting profits and investment income through the captive.

Hospitality firm looking to simplify program administration and reduce costs.

Lack of majority ownership across all properties created a need for individual workers’ compensation policies, creating layers of administration and less than optimal premium terms.

Keystone adapted group captive approach.

• Individually premiums are developed by policy through one issuing carrier.
• Total premiums for the portfolio of properties are aggregated and reinsured to a captive owned by the hospitality firm.
• The hospitality firm retains frequent and predictable losses within the captive and transfers the catastrophic exposure to the commercial insurer.
• Insurer simplifies program administration under one consolidated program.
• Hospitality firm reduces cost through greater control over claims and accessing the resulting underwriting profits and investment income through the captive.

Food Distribution Company looking to obtain comprehensive product recall insurance given their unique exposures.

Exclusions under a traditional policy created coverage gaps that exposed the insured’s finances. As a thin-margin business, a substantial food borne illness recall would significantly impact net income and operating cash flow.

Keystone manuscript, claims-made policy form with limits funded through premium paid to a captive.

• A modest annual premium under a captive policy is deferred from taxation, which allowed the insured to efficiently and rapidly accumulate a dedicated asset base for this infrequent yet substantial exposure.
• In the event of favorable loss experience, underwriting profits and investment income within the captive accrue to the owners of the business.
• Direct access to the reinsurance market allows for the expansion of limits and coverage in future years.

Contractor with solid risk management looking for a loss sensitive approach.

Operating companies needed a “fixed cost” product in order to justify overhead expenses to clients during bids. Traditional loss sensitive plans had too much uncertainty and claims experience was too good to remain in guaranteed cost.

Keystone hybrid large deductible plan using a captive to finance deductible.

• The sum of premiums for the large deductible and captive policies created a “fixed cost” for the business and provided the justification for insurance expense in the bid process.
• The variable cost of actual loss experience was transferred to the captive with underwriting profits, resulting from solid risk management, accruing to the owner of the company.

Nursing Home Operator requiring professional liability coverage for licensing requirements and bank loan covenants.

Jurisdictions of operation were very unfavorable and insured loss experience was poor. Traditional insurance premiums were nearly equal to the policy limit, making coverage unaffordable.

Keystone “fully funded” program with highly rated commercial policy secured in full by a captive.

• Highly rated policy simplified state, vendor and bank compliance requirements through conventional certificate issuance.
• Client assumed full control of financial decisions involving claims which resulted in lower loss costs and a substantial net cost savings in comparison to the traditional risk transfer options.
• Claims-made structure allowed for the rolling over of underwriting profit and investment income, which allowed the option of offering greater policy limits in future years.

Financial Services Firm looking to adapt insurance program to changes in their regulatory compliance needs. 

Commercial market was unwilling to offer comprehensive insurance that resulted in unpredictable gaps and uninsured exposures.

Keystone customized direct captive reimbursement coverage to “spackle” cracks or gaps in coverage and uninsured exposures.

• Balance sheet volatility for uninsured risk transferred to the captive through payment of premium.
• Large loss exposure for regulatory actions was distributed within captive that insured multiple lines of coverage and a statistically significant number of independent risk units.
• Dedicated source of tax-efficient, rapidly accumulated funding for large loss exposures.
• Compounding of reserves within the captive created a “shock absorber” that provided stability for annual budgets and forecasts of self-insured obligations.

Nationwide Transportation Company looking for an efficient P&C solution for a complicated web of corporate and franchisee insurance needs.

Insurance needs varied due to interstate commerce and specialized individual state requirements. Current insurance program involved multiple carriers including loss sensitive and guaranteed cost arrangements, resulting in a fragmented and resource- intensive plan.

Keystone hybrid large deductible plan using a captive for corporate risks; “bolt on” group captive for franchisee risks.

• Consolidated program to reduce expenses, simplify administration and leverage risk management resources to reduce claims.
• Captive vehicle stabilized budgeting and provided transparency to align interest in performance across the enterprise.
• Combined reinsurance reduced expenses and aggregate loss retention for the franchisees in the group captive.

Nursing Home Operator growing rapidly through acquisitions looking for ways to reduce workers compensation costs.

Decentralized operation stretched resources and individual locations were too small to assume any risk.

Keystone hybrid large deductible plan using a captive to finance deductible.

• Individual locations transferred risk under the large deducible through a fixed cost premium to a centralized captive.
• Captive efficiently distributed the risk, creating stability of insurance costs across the enterprise and eliminating any volatility at the location level.
• Risk management resources were also centralized with the cost of the program borne by the captive and not the facilities.
• The captive owner aligned interests in risk management by allocating underwriting profits to support individual premium reductions to those locations meeting defined metrics along with the best claims performance.
• The captive’s reporting package included metrics that allowed management to more quickly identify and respond to positive and negative trends at the individual facility level.

Regional Hospital looking to reduce insurance expenditures associated with their professional and general liability coverages while complying with both state level and calendar year cost reporting.

Insured purchased guaranteed cost policies as the traditional large deductible approach did not efficiently meet both state and internal annual cost reporting.

Keystone hybrid large deductible plan using a captive to finance deductible.

• Long-term cost savings through claims management and access to underwriting profits within the captive.
• Captive complied with cost reporting requirements and eliminated the inherent uncertainty of dealing with complicated, “down the road” adjustments under traditional loss sensitive arrangements.

Retirement Community Developer looking to share economics of their enterprise across a diverse investor group. Investors were concerned with “tail” exposure of loss sensitive arrangements.

Expenses for commercial insurance were steadily climbing due to unfavorable losses and the resulting cost was eating into investor profits.

Fixed cost premiums for individual properties were paid into a centralized captive solution that shifted and distributed the risk of individual “tail” exposures to the portfolio of insureds under management.

Execution of a tailored risk mitigation/claims handling platform provided greater control over claims.

• Insured assumed and aggressively managed frequent, predictable risk to generate underwriting profit in the captive through significant claims cost reduction.
• Unforeseen volatility of individual property loss experience is muted by the larger portfolio of insureds which absorbs any adverse “tail” experience.
• Structured the beneficial ownership of the captive to create a preferred return of captive underwriting profits as a way to incentivize risk management and enhance investor value.