Thinking for Group and Association Captives Group captive development and inherent channel conflicts

Thinking for Group and Association Captives Inherent Challenges Internal Governance (Operating documents are key) Managing Group Expectations External Managing Channel Conflicts

Thinking for Group and Association Captives Group collaboration and strategy for captive Key Elements: Structure of the Group Captive or Association Operating Documents and Governance is one of the foundations for long term success. Board Design Aligning criteria for membership onto the Board of Managers (Decision Makers) Communicating and developing an understanding of insurance and risk management among board members Focus by the board in setting the direction for the group captive or association Committees (bulk of the work) Finance Risk/ Loss Control and Claims Management Committee Underwriting Marketing

Thinking for Group and Association Captives Managing Group Expectations Key Elements: Managing conflicts and aligning interest for the group through Board collaboration and continued education. Homogeneous group captives are desirable because they afford you the advantages of collaboration in managing like risks , however they pose challenges in that the group may consist of industry competitors even though they are part of the group captive or association Distribution of Dividends Having your Standards & Formulas or distribution plan for dividends in place when you first establish your group captive or association will assist you in avoiding later conflicts and set expectations for the group. Loss Control Creating a collaborative environment when reviewing and understanding the group’s loss performance along with adopting best practices to address loss trends . Underwriting Discipline to the captive or association’s underwriting principles and approach to membership.

Thinking for Group and Association Captives Managing Channel Conflicts Key Elements: Open Market Alternative Risk Solution Advantages for allowing an organizations to retain their insurance agents and brokers. Key to the long-term distribution of the group captive to potential members. Education The agents and brokers may have a significant knowledge gap concerning the captive concept. Group Captive or Association may depend on the agents/brokers to market the captive to potential customers. The agent/broker must have a good understanding of how the captive works. We find that agents/brokers are reluctant to sell products that they don’t fully understand themselves and if the agent/broker is not comfortable with the captive concept, the outcome is likely to adversely affect the captive. Managing conflicts and aligning interest for the agent/broker Broker identification that the group captive or association is in the best interest of their client. Dispel notion that the agent/broker may lose control of their client if they join the group captive or association. Broker tolerance for fee base versus commission and profit share if necessary. Tackling the fronting carrier’s channel conflicts.