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Executive Overview

Catalyst is a member owned homogeneous group captive domiciled in the Cayman Islands. Each Shareholder represents a single and equal vote on Catalyst’s Board of Directors regardless of premium size.

Catalyst operates on a three year accounting cycle. Meaning they generally will look to make partial distribution of profits three years after an individual underwriting years has ended and close their accounting for a single underwriting year five years after an individual underwriting year has ended. Each underwriting year stands on its own.

Catalyst premium is developed through the use of an actuarially determined loss forecast. The actuary will use five years of loss history for all lines of coverage; generally, this includes Workers’ Compensation, Auto Liability, and Auto Physical Damage. The loss funding, derived from the actuarial forecast, is broken-out into two categories by the actuary known as the “A & B” Funds. The “A” Fund pays for the first $100,000 of any loss and the “B” Fund contributes to the remainder of the company’s loss layer up to $300,000 total per occurrence. In addition, the concept of risk sharing and risk shifting is important to Catalyst for premium deductibility purposes. A complete copy of the premium formula is available in our offering memorandum.

Simply put, expected losses are funded by the member and remain in that member’s individual equity account, within Catalyst, until losses are paid. Each member receives investment income on their equity balance until that specific underwriting year is closed. The tail liability for a mature underwriting year will be sold into Catalyst’s yet to be created internal rolling tail fund. The remaining equity balances, including investment income, are disbursed in correlation to the final performance of each member.

Catalyst and its members are protected by purchasing both specific and aggregate excess insurance. Specific excess reinsurance protects the captive against a single catastrophic loss. The aggregate excess protects the captive against a high number of frequency losses that fall within Catalyst’s retained limit. Combined, these coverages provide Catalyst members with the comfort of a loss “cap” at a predetermined level for each policy year. The “maximum” premium in Catalyst is two times the “A” Fund plus the “B” Fund plus operating costs. The concept is based upon controlling the predictable losses and insuring away the unpredictable losses.

As was mentioned, each Catalyst member has a potential maximum of one additional “A” Fund. As a result, each member must provide letter of credit or cash security equal to their “A” Fund. An additional 100% of “A” will be posted for each additional underwriting year up to a maximum of 300% of the average “A” Fund for the most recent three years is reached. This provides member to member security, capitalization for Catalyst, and supports a single back to back letter of credit to the policy issuing carrier (Chartis) who is the ultimate financial guarantor for Catalyst.



 

 

 


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