Contractor's Multi-Line Primary Casualty Solution

Situation:

An East Coast trade contractor was looking to the alternative market for a tailored insurance market.  The company was purchasing guaranteed cost insurance, though it had all of the attributes of a cost-plus buyer: Casualty lines premium of $2million, 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.

Problem:

Much of the contractor’s insurance costs were reimbursed by third parties.  Moving to a large deductible or retrospectively rated structure 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 it’s ultimate liability (worst case scenario).

Solution:

The insured’s broker contacted Keystone Risk Partners(KRP) to explain the situation.  During a conceptual meeting with the contractor and broker, The “Keystone Large Deductible” was introduced.  The Keystone Large Deductible incorporates two policies; 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.