Frequently Asked Questions
Captive Insurance Companies
- Why was Catalyst formed?
To provide ownership, stability & control to the owners/members of the company. The insurance marketplace has historically endured “hard” and “soft” market cycles where premiums go up and down with little relation to your actual loss experience. By leveraging your resources and becoming an owner of an insurance company, these swings can be eliminated, making insurance costs not only more predictable, but actually profitable. This is achieved through loss-based premium development, unbundled services and the ability to retain investment income.
Returning to the Traditional Markets
- I’m concerned that if I join the captive, but later decide to leave it and return to the traditional insurance markets, the traditional markets won’t take me back. Should I be concerned about this?
No, not at all. If you are considered a well run company, perhaps because of favorable claims experience, or merely because you pay your premiums on time, the traditional markets will be happy to have you. Fear tactics (i.e. retribution and/or punishment) are not real traditional insurance market motivators. Quite frankly, as a member of the captive, you are insured by a licensed and admitted A rated carrier, so to the outside world, no one would even know you are in a captive unless you told them.
Effect of a Catastrophic Claim
- I’m concerned that if I join the captive, and then have a catastrophic claim, I could either be thrown out of the captive, penalized with additional assessments, or see my captive premiums go up substantially the following year.
Catalyst has never “thrown out” a member as a result of one catastrophic claim. In the traditional markets, historically, a single severity claim could cause your premiums to skyrocket or your coverage to be non-renewed. In the captive, a member’s premium is determined based on its last five years loss experience, where each of the last five years counts 20%. Accordingly, although a major claim could cause some rise in the next year’s premium, because each year of the last five is only 20%, including single claim limitations, there’s built-in protection from any abrupt, significant premium increase.
Premium Payment Terms and Premium Financing
- What is the schedule on which members pay their annual premiums?
Members pay premiums in 4 equal installments on the following dates 6/1, 9/1, 12/1 & 3/1 with no finance charges to apply.
When Traditional Insurance Markets Harden
- Our insurance premiums have been flat the last several years, even reduced a bit perhaps. I understand that we’ve been in a soft insurance market for the last few years, and that rates will eventually go up. First, how do the captive’s rates compare to the traditional markets in this soft market? Second, won’t the captive’s rates also go up when the markets harden?
Even in this very soft insurance environment, captive proposals have been competitive with the traditional markets; and that is completely before taking into account that captive members can receive up to 60% of their premium back as dividends, and receive 100% of the investment income from their loss funding. Even better, however, is that when the traditional insurance markets harden, the captive premium levels will be left mostly untouched by market conditions. Captive premium is not determined by market conditions but, rather, by assessing the members’ last five years loss experience. If your claims remain low/stable, so will your premium.
Competitors in the Captive
- I believe that one of my competitors is a member of the captive. I like the idea of joining the captive, but I’m not sure I want to be in it if my competitor is. And I certainly don’t want my competitor having access to my confidential business information.
Ironically, because there’s only a small handful of traditional market insurers out there today who insure the ambulance industry, chances are that you and your competitors are currently insured by the same insurer. The difference is, in that instance, you have no ability to keep the poorly run ambulance companies out of your insurance program, but their bad claims experience is certainly one of the several reasons that your premiums can increase. If your competitors are in our captive, rest assured they’ve been vetted through our underwriting process, and they’ve proven that they know how to control losses and otherwise perform as good captive members.
As for confidentiality, it’s true that as co-owners of the captive, you’re all entitled to see all the captive’s claims experience and financial data. However, each member is assigned a member number when they join, and all data that is distributed to the membership is displayed using only the assigned member numbers, not member names. Accordingly, you’ll never know your competitor’s member number, nor they yours. Individual internal company financial data is not shared amongst the members.
Choice of Counsel for Your Claims
- Our insurance company has always assigned us counsel when we’ve been sued. Sometimes this has worked out fine, but other times we’ve been unhappy with the attorney assigned, but we couldn’t do anything about it. We believe that those assignments are part of the reason we’ve had poor results in settlements or trials, and of course those expensive results are part of the reason our premiums remain high. In the captive, would we have more input into the decision about counsel?
Yes! Our members have substantial input regarding choice of counsel if they desire. We prefer that our members use attorneys that they know, are comfortable with, and that have knowledge not only of the medical transport/health care industry, but of our member’s company as well.
Member Input on Reserves
- We’re often shocked to learn of the high reserves that our insurer or its claims administration company put on our claims. We understand that reserves are part of our “incurred claim amounts,” which in turn lead to higher premiums. Are reserves handled differently in the captive?
Yes! Reserves must still be set, but in the captive the claims administration company consults with you about reserves. We’ve often found that the member company knows something about the claim, for example a work comp injury that can lead to lowering or even extinguishing the reserve. This input on reserves is part of the “control” that the captive is all about.
Member Input Concerning Settlement or Trial
- We’ve been frustrated in the past to learn that our insurer settled a claim, and we knew nothing about it and, in fact, would have opposed it. Are captive members consulted about settlement, including whether to settle or try a case?
Yes, captive members play a substantial role in whether claims should be settled, and for what amount. Typically, the member gives the claims administration company a dollar threshold below which a claim can be settled without consulting the member.
- Has the captive paid dividends yet?
Yes, dividends have been paid. Because Catalyst began on June 1, 2005, the first dividends, for members who were in the captive in its first year, were paid after Board approval at the Fall 2009 Board meeting.
Underwriting Materials for Proposal
- If I want to proceed with securing a captive proposal, what information do I need to send you?
We’ll need essentially the same information your traditional market broker would likely collect before going to market for you. This includes: 1) your last five years’ loss runs, currently valued, for your auto and workers’ compensation coverage; 2) the last five years historical premium numbers; 3) copies of your current insurance policies; 4) your last five years exposure data, i.e. payroll, number of power units; and 5) financial strength confirmation. Once we’ve received all this data, we can usually finalize our proposal and meet with you to review it within thirty days.
Trouble Securing Loss Runs
- I’ve been seeking my loss runs from our local broker, but they tell me that this takes a while, or they simply don’t send them. Do you have any suggestions?
Typically, loss runs are easy to get, and require but a few minutes of your local broker’s time. We’ve had many members report that they called their current broker for loss runs, and they were emailed within minutes. There are many reasons why someone might delay sending them, but none of these reasons are valid. Candidly, the main reason is to protect their own business interests (i.e. commissions). Moreover, most states’ insurance laws require that your broker send you your loss runs within a very short time period. If it would be helpful to you, you can authorize our captive broker to seek these loss runs on your behalf.
Captive Due Diligence on Prospective New Members
- Our ambulance operation is high performance with a superior safety record. We’ve spent a great deal of time, effort and expense to get there. If we consider joining the captive, we want to know that the quality of your other members is similarly high. What types of due diligence does the captive perform on prospective members?
Catalyst’s due diligence occurs on several levels, and at the members’ insistence, it has grown over time and will likely continue to do so. A few examples, however, include 1) thorough review of the prospect’s last five years loss runs; 2) business and legal reviews; 3) assessing the prospect’s financial condition to ensure it can meet its captive obligations. Depending on what issues surface during the process, there maybe additional follow-up.
Captive Facts & Figures
- Can you give us some general information about the captive?
Catalyst started operation on June 1, 2005. As of June 1, 2020, it has 84 members from 26 different states, and total captive premium of approximately $61 million. The captive coverages include workers’ compensation, and auto liability including auto physical damage. (Our captive brokers will also arrange for your other coverages, including general & professional liability, umbrella, property, directors & officers, etc.) The claims experience of the group has exceeded expectations.
Satisfying Your Contractual Insurance Requirements
- We have contracts with hospitals and other health care facilities that require us to maintain insurance policies that are at least “A” rated. If we join the captive, will it satisfy those requirements?
Yes, the captive’s policy-issuing carrier who actually issues your policy, and whose name will be on your insurance certificates, is licensed & admitted and “A” rated.
Per Claim Deductibles
- Once I join the captive, is there a per claim deductible that we have to satisfy before the captive coverage responds to the claim?
With the exception of a small maintenance deductible for auto physical damage claims, there is not a per claim deductible. Once you’re a captive member, the coverage is dollar one and subject to the captive formula.
Catalyst’s Board of Directors
- Who sits on Catalyst’s Board of Directors?
Catalyst's Board is made up solely of its ambulance & allied healthcare medical company members. Each member has a seat on the Board of Directors. Each member has one vote regardless of size. The service providers provide advice to the Board, but have no vote or ownership themselves.
Catalyst’s Professional Service Providers
- Who are the service providers to the captive?
Loss Control & Claims Handling Services
- What loss control and claims handling service enhancements are provided by the captive that are not normally available in the traditional insurance marketplace?
The captive has a specialized loss control program administered by Gallagher Bassett which includes, among other things, two site visits per year. Special handling instructions for each member’s claims are developed and applied by the claims administrator, also Gallagher Bassett. In addition, Captive Resources assigns a member of its claim and safety staff as your claims advocate. Finally, Catalyst hosts an annual Risk Control Workshop to help members stay focused on reducing incidents and managing the claims that do happen. These workshops work to educate, energize, and engage members on implementing safe workplace policies and procedures.
- What happens to my experience mod if I join the captive?
You retain your experience mod while you are a member of the captive. It is not used in the development of your premium, but the policy issuing carrier will continue to file unit stat cards to the appropriate regulatory bodies.
- Is there a minimum size for a captive member?
Yes. Currently captive members must have a minimum captive premium of $100,000.