Erich A. Brandt

Captive Feasibility Study

When a regional physicians group, with a moderate deductible program realized they were not getting due credit for more than a decade of exceptional loss experience, they decided to explore other options.

They chose Pinnacle specifically due to our expertise in captive and self-insurance programs.

Initially, Pinnacle discussed options including segregated cell captives, single parent captives, and even risk retention groups once they began to consider marketing the program to other similar regional physician groups.

While the customer was considering the structural alternatives, Pinnacle pursued a funding analysis. Credibility weighting the customer’s experience with industry benchmark data, produced estimates of expected losses and loss variability in several different loss layers. This not only showed the additional risk associated with higher limits of self-insurance, but was also tremendously valuable in negotiations with fronting carriers and reinsurers.

The client decided to increase the deductible on the coverage provided by their insurer, which offered more responsive pricing due to Pinnacle’s funding analysis and to form an off-shore captive providing deductible buyback coverage.  The comfort level our client had with the insured’s services also influenced the decision.

Pinnacle also worked with the captive manager to develop the feasibility study and pro forma financial statements that become the foundation of the captive application. The application was approved as submitted and the captive is running quite successfully.

Rate Indications / Filings

A regional carrier came to Pinnacle wanting to implement an insurance score program along with rate indications for home, auto and farm. Pinnacle developed rate indications for each line, and developed an underwriting scorecard rating approach using insurance score as a critical component. The combination of implementing appropriate rates and the new rating plan enabled this company to turn their business around, become profitable and rebuild their surplus position.

Staffing Self Insured Reserve Analysis

Pinnacle was retained by a group of staffing companies with large self-insured retentions for their workers compensation loss exposures to perform quarterly loss reserve analyses and annual funding studies. Pinnacle initially used customized benchmarks for the staffing as the basis for our analyses. However, it became apparent that the benchmarks were not reflective of the unique characteristics of this program. Pinnacle worked with the third party administrator (TPA) for the program to gather additional historical experience for the program, as well as consolidated experience for several similar programs administered by the TPA. Using the results of our analysis of the TPA’s previous experience for this program and others like it, we were able to develop benchmark loss development assumptions that tracked much more closely with the program’s actual loss emergence.