Organized Sports League
Problem
An organized minor sports league consisting of 25 separate, privately held companies is seeking Workers’ Compensation coverage. Both the traditional and the alternative market have left the client with no options beyond the individual state funds.
The KRP Process
Spent time with the broker to understand previous marketing efforts.
Worked with several carriers who had previous declined to quote the deal to understand their position.
Through this canvassing of the market, KRP was able to determine that the account structure, rather than the underwriting risk was driving the market’s decision to decline. 25 policies, none of which qualified for deductible credits, did not fit the insurers’ appetite in the current market.
KRP worked with the client through the broker to create a new operating subsidiary fully owned by the League. The new entity became the employer of all the players, coaches, refs and trainers then simply leased the employees back to the individual teams.
The new entity generated sufficient standard premium to qualify for deductible credits. We re-approached the markets with a high deductible program structure and were successful in creating a workable deal for both the client and the insurance carrier.
Benefits to Client
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Retained control of claims by avoiding the State Funds and maintaining a successful TPA relationship.
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Took advantage of substantial premium tax expense savings through the new deductible structure.
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May recognize further savings down the road by combining the payroll and employee administrative functions of all the teams through the new entity.
Family Owned Manufacturer
Problem
A family owned manufacturing business faced a dramatic increase in its annual premium for workers compensation insurance. In addition, the owners wanted to explore the ways in which insurance could be used as part of a deferred wealth accumulation strategy.
The KRP Process:
Spent time with broker to understand previous marketing attempts and with the client to get a general understanding of their long range financial objectives, comfort with risk retention, cash flow and tax strategies.
Based on client objectives, KRP was able to develop a high-deductible rent-a-captive structure that addressed the risk retention objectives. The carrier was secured with an innovative deductible reimbursement policy issued by a rent-a-captive company associated with KRP which the client funded with regular premium installments.
Claims and risk management function was purchased on an a-la-carte basis to allow the client input over the financial decisions involving claims.
Benefits to Client:
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Client was able to build a loss sensitive approach to their risk tolerance needs
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They were able to efficiently finance the carrier’s security needs and manage the underwriting of long-term insurance liabilities to their companies balance sheet and income statement by utilizing a rent-a-captive structure.
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Underwriting profit and investment income resulting from the effective management of claims would be used to fund the wealth accumulation strategies of the principals of the firm.
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