Category: Latest Thinking

By Lisa Vanore

For some organizations, preparing for a catastrophe is embedded into business operations and always top of mind. For others, it might not even be on their radar. The truth is damaging incidents can happen anytime, anywhere. Catastrophic claims can arise regardless of the industry or size of a company and have the potential to bankrupt an organization if not protected.

The value of a claim is not always directly correlated to whether a claim is defined as catastrophic. While some types of claims are immediately identified as catastrophic, others are not easily identifiable and may develop over time. Catastrophic claims can include fatalities, serious injuries, incidents that involve multiple claimants or class actions, and events that threaten an organization’s reputation.

Catastrophic events are often unexpected but having mitigation tools in place can lessen the blow and help organizations quickly respond to and manage an incident. Partnering with brokers with a thorough understanding of the steps to take when a catastrophe occurs is key to ensuring your business is in the best possible position.

Mitigating Loss When Disaster Strikes

When a catastrophe occurs, the way in which an organization responds can change the nature of a catastrophic claim and affect the ultimate outcome. Here are the key steps organizations should take following a catastrophe:

1. Respond quickly – The top priority should be protecting people, making sure all employees and those involved are safe and receive proper care. Report the incident promptly to the insurance carrier, as delays can negatively impact the complexity of the claim and the cost. A broker should be brought in as soon as possible to help manage reporting timelines and push the process along if carriers are slow to assign an adjuster to investigate the claim.
2. Manage the loss – Secure any and all evidence from the incident. A thorough investigation should be conducted and, if applicable, defense counsel should be brought in. Depending on the type of incident, other resources, such as experts, may also be needed.
3. Determine claim strategy – Work with claim management partners to determine a strategy that ensures the least impact on the bottom line, whether that’s early settlement, litigation, or otherwise. At this stage, organizations should strategize how to find a resolution that makes sense for all parties involved.

Preparing for the Unexpected

Having the appropriate mitigation practices in place before an incident occurs is also fundamental to improving outcomes. Without them, organizations can end up with increased costs and losses. To ensure prompt and effective response, the following preventative measures must be in place:

• Loss prevention and training procedures – Organizations should have processes and procedures in place that are designed to prevent losses and minimize the impact of catastrophic events before they occur. All employees should be trained on these processes and procedures so that they can act quickly during an incident and prevent further loss from occurring.
• Crisis management and emergency response planning – Crisis management and emergency response plans should be in place and should outline procedures and actions that need to occur following an incident. An insurance broker can help organizations conduct risk assessments to determine potential crisis scenarios and identify what needs to be included in response plans to be best protected.
• Incident reporting and investigation procedures – Create and implement incident reporting and investigation procedures that clearly define what types of incidents are reportable to key stakeholders and who within the organization is responsible for reporting such incidents. Without a process for alerting various internal and external stakeholders of incidents, critical actions may be missed, ultimately adding to the complexity of the claim. When these procedures are in place and executed successfully, organizations can identify incidents early and triage effectively in an effort to prevent the incident from turning into a catastrophic claim.
• Claims management process – Organizations also need to establish a claims management process that outlines reporting procedures and names strategic partners, including carriers, expert advisors, and defense counsel. Having key partners in place prior to an incident will ease coordination efforts and reduce friction between parties when it comes to determining a claim strategy.

Taking Control of the Outcome

Insurance carriers are paying billions of dollars each year for covered catastrophic losses. Rising litigation costs, plaintiff-friendly legal decisions and larger jury awards as a result of social inflation are leading to increased payouts, losses, and coverage costs.

In this environment, it is increasingly important for businesses to prepare for catastrophic events and have the right partners in place to help. An insurance broker can be an invaluable resource when an incident arises, providing advice, consult, and guidance throughout the claims process.

At Conner Strong & Buckelew, our insurance brokers lead the industry in catastrophic claims guidance and have strong relationships with carriers to ensure coordination and the best possible outcomes for clients. Our robust team of claims consultants and safety experts work side by side with our clients to deliver a holistic approach to managing and preventing catastrophic claims, with expertise in managing claims and implementing safety and risk control programs.

To review your current coverage and make sure you are protected when catastrophe strikes, contact a Conner Strong & Buckelew representative.

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BY Jim McGlynn,  Michelle Leighton, Travis Shaffer, Juanita Gadsden

As all New York property owners and general contractors know, Section 240 of  New York State Labor Law, the official name of the state’s Scaffold Law, presents a wide range of legal, insurance and risk management challenges. While originally passed to protect construction workers from serious falls, falling objects and other elevation-related accidents, the Scaffold Law has evolved into a major area of risk that can lead to multi-million-dollar lawsuits.

The Scaffold Law imposes strict liability on property owners and general contractors in the event of an elevation-related accident on a job site. Because of this, injured workers who would normally receive workers’ compensation from their employer also have the ability to file tort lawsuits against the owner or contractor for additional damages. Even if the worker was partially at fault for the accident, property owners and contractors can find themselves being held liable for damages.

Famously high payouts have occurred as a result of these lawsuits, causing considerable financial damage for the defendants. For example, a New York county jury previously awarded $96 million to the families of two workers who were killed during a workplace accident in 2015. The prior year, a jury awarded $62 million to an injured worker who fell from a building roof while on the job.

These lawsuits negatively impact property owners and general contractors in a number of ways. Aside from leading to increases in defense costs and multi-million-dollar claims, the Scaffold Law has led to increased insurance costs that drive up overall construction costs in New York. These additional expenses elevate the total construction costs of a given project by as much as 10% on average, according to a recent report from the General Contractors Association of New York.

As insurance brokers for many general contractors and property owners in New York, we understand the importance of mitigating risk, maintaining worker safety and keeping insurance costs down. In our decades of experience working with New York contractors and property owners, we’ve identified three ways these organizations can limit their exposure to the Scaffold Law. Here’s how:

1. Taking enhanced workplace safety measures

In general, and particularly considering the Scaffold Law, taking a proactive approach to worksite safety is critical. Property owners and contractors should start by ensuring scaffolds, ladders and other access points to the worksite are properly designed, constructed,  and well maintained. Similarly, all construction and safety equipment must be inspected regularly to confirm they are in good working condition.

Worker training is another crucial aspect of mitigating risk and liability. Contractors and property owners should consider creating a system to verify that every worker on-site has been properly trained on general safety, but also on jobsite specific hazards that may be encountered on a project. Contractors and property owners should also properly document and maintain records of all education and training for workers, as well as safety meeting attendance.

Hiring subcontractors with strong track records of safety performance is also important. Starting this due diligence process by reviewing their qualifications, verifying their licenses and searching their citation history on OSHA’s website are good places to start. Additionally, contractors and property owners should consider hiring a site safety manager to oversee any worksite where elevation-related accidents could take place.

2. Signing risk-transfer agreements

One of the most critical steps property owners and general contractors can take to limit their exposure to lawsuits is to contractually transfer their potential Scaffold Law liability to subcontractors. By writing appropriate language into their contracts, including hold-harmless provisions and broad indemnity agreements, property owners and contractors can shield themselves from liability in the event of an accident.

New York law is unique in that it voids construction agreements that attempt to transfer a party’s liability for its own negligence. Therefore, property owners and contractors need to ensure these agreements are written such that negligence is not a factor that triggers these protections. Additionally, property owners and general contractors should require subcontractors to name owners and general contractors as additional insureds on General Liability and Umbrella / Excess liability insurance policies to ensure these subcontractor organizations have the financial means to honor their indemnity agreements.

3. Pursuing rigorous workers’ compensation claims mitigation

Another way to mitigate risk is by taking an ultra-responsive and thorough approach to workers’ compensation claims, especially those with the potential to turn into Scaffold Law-related claims. Property owners and contractors must promptly report all workers’ compensation claims and quickly develop a mitigation strategy. By getting ahead of the claim, policyholders can control it from the onset. A field investigator should be assigned to conduct a full on-site investigation immediately after the accident, and legal counsel should be brought in early to mitigate risk and form a defense strategy in case a lawsuit is eventually filed.

It is critically important to preserve all evidence that could be useful in a case, including comprehensive incident reports with photos of the accident scene, and any equipment involved in the incident. This investigation process should also include securing witness statements and contract information for the investigator and defense counsel to use during any follow-up. Time is of the essence. The faster these actions can be performed, the better protected property owners and general contractors will be.

Don’t go at it alone

Issues around the New York Scaffold Law can present general contractors and property owners with serious legal headaches that can lead to  inflated claim values. It is critical these parties not go at it alone. Working with an insurance broker who is familiar with the exposures and claims surrounding the complexity of the Scaffold Law can ensure these organizations have the support they need in the event of an accident. Experienced insurance brokers can help property owners and contractors prepare for these incidents before they arise by establishing a process for responding to elevation-related accidents. With a plan in place and support from an expert team, property owners and general contractors can best protect themselves from a potentially devastating financial situation

By Joe DiBella, Managing Director, Executive Vice President, National Health & Benefits Practice Leader at Conner Strong & Buckelew

New technology, medications, and medical procedures have vastly improved healthcare providers’ ability to diagnose and treat severe illnesses.

These medical advancements are incredible for patients and can save lives. But they are also increasing the frequency and severity of large and catastrophic employee benefits claims. This can lead to financial stress for self-funded employers. In fact, a 2020 survey conducted by Sun Life found that nearly 25% of employers had at least one member with over $1 million in claims between the years of 2016 and 2019.

Large claims will become the norm as medicine continues to advance. In turn, employers need to ensure these claims are managed properly and that they’re not overpaying for certain procedures, treatments, and medications.

ClaimCheck from Conner Strong & Buckelew was built to help self-funded employers accomplish just that. ClaimCheck is a proprietary employee benefits claims screening process that closely examines large and catastrophic claims. It automatically ensures these claims are being properly managed by the complex healthcare system, adjudicated pursuant to the plan of benefits, and paid properly.

ClaimCheck follows a 5-step process that has been methodically developed, ensuring no large claim is overlooked or mismanaged throughout the course of engagement. Here’s how it works:

• Step 1: A claim will be flagged for review by a Conner Strong & Buckelew clinical nurse once it reaches either $100,000 or 50 percent of the client’s stop loss deductible, whichever comes first. The claim is reviewed for eligibility, care management and ongoing monitoring to ensure all needed care management oversight is in place.
• Step 2: If immediately needed, a clinical nurse will review the care management plan and options with the health plan’s care management team. When warranted, the claim will be elevated to the Conner Strong & Buckelew physician Chief Medical Officer for a more thorough clinical review.
• Step 3: Once flagged, these claims remain under “open” management by the clinical team at Conner Strong & Buckelew to ensure appropriate care management. This ensures proper evaluation over the course of the engagement.
• Step 4: Claims remain open until treatment is concluded and/or the client receives applicable stop loss payment. Even after payments are made, claims are monitored for ongoing appropriateness.
• Step 5: Finally, any claim more than $200,000 goes through a case audit of the carrier’s adjudication accuracy of the claim to ensure all claims were paid properly.

With large and catastrophic medical claims on the rise, self-funded employers need to ensure these claims are being managed properly. Overpaying for an already expensive procedure or medication is not an option. With ClaimCheck, these business owners can rest easy knowing their claims are being handled as efficiently as possible.

Contact us for more information on how to ensure your claims are being managed properly.

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Anyone who has experience in risk management will agree with Stanford professor Scott Sagan’s statement that “Things that have never happened before happen all of the time.” Planning for the unknown is inherently uncertain. The high-water line on a Venice canal is only the highest until the next historic flood, just like the largest cyber attack is only the largest until the next bigger one.

Luckily for risk managers and corporate executives, there are tools to help minimize uncertainty. Enterprise risk management (ERM) is one such tool that business leaders in nearly every industry can leverage to better identify, understand and mitigate risk. Conversely, it can help propel an organization forward by embracing the rights risks at the right moments.

ERM is defined as a holistic process of scanning for and identifying, assessing, managing or otherwise treating internal and external risks. What separates ERM from traditional risk management is the emphasis placed on creating a consistent, structured and continuous process that produces a 360-degree view of the risks facing an organization and sharing that view with complete transparency across the entire organization.

This process pushes traditional risk management a step further by approaching risk in a way that accounts for the organization’s strategic business goals. With an intimate understanding of all areas of risk at the enterprise level, business leaders can most effectively allocate their resources in ways that address both insurable and non-insurable risks while aligning with underlying business objectives.

Implementing an ERM process can be a sizeable undertaking, but doesn’t have to be. When properly employed, it promotes transparency of risks between senior staff and board members in ways never before possible. In doing so, businesses can position themselves to thrive today and be prepared to capitalize on opportunities and avoid pitfalls in the future.

In over 20 years of helping implement ERM programs into a wide range of businesses, I’ve identified a number of benefits that nearly every organization can reap through the process. Here are just four of the undeniable benefits of ERM:

1.) Bringing intentionality to your treatment of risk

The number one benefit of an ERM program is its ability to create a systematic and intentional process to identifying and addressing risk. Too often risk management is thought of as an ad-hoc exercise where liabilities are addressed as they are discovered.

ERM provides a repeatable process that can be implemented across the organization to continually monitor and identify areas of liability or opportunity. Most importantly, it introduces the opportunity for business leaders to best address these risks. The result is an ongoing process for continuous improvement and optimization of the organizations’ risk management efforts.

2.) Embedding risk considerations into operational decision making

Risk management assessments aren’t very effective unless they are communicated up and down the organization in ways that allow employees to implement them. When risk management is conducted at the enterprise level, it goes a long way in producing a risk-oriented culture across the entire organization. When managers and decision makers on the front lines can be consulted on and informed of risks facing their departments, they can simply and easily implement risk management best practices into their daily operations.

3.) Breaking down silos to build transparency

Almost all organizations that experience organic growth will naturally at some point end up with silos separating different departments within the larger enterprise. Various operating and staffing units begin working in their own ways based on their own individual mandates and objectives. This can lead to risk management issues when clear lines of communication are missing between silos.

When risk management is implemented at the enterprise level, ERM breaks down these communication barriers and builds transparency into risk management efforts by taking a high-level, holistic approach that is carried out throughout the entire organization.

4.) Comprehensively managing risk with creative solutions

When implemented correctly, ERM programs are able to help business leaders find creative solutions to various areas of risk facing their organization. For example, these solutions can include alternatives to traditional insurance programs, such as captive insurance, that allow companies to gain greater stake in their insurance costs and risk management programs.

Alternative finance structures can provide organizations with the opportunity to add to their bottom lines when claims are low, while staying protected when the unfortunate occurs. With an enterprise-level view of risk management and insurance needs, it becomes much clearer for decision makers on when and how to implement creative solutions.

Leveraging ERM Expertise

While the benefits of ERM are clear, many business leaders are hesitant to dive into an ERM program because it can be difficult to know where to start. Partnering with a broker experienced in implementing ERM programs can help.

Conner Strong & Buckelew’s ERM experts are able to provide a strategic hand, whether your organization is looking for a consultant to optimize a specific element of your existing ERM process or a full-fledged partner to help you build a program from the ground up.

With new risks evolving by the day, risk management professionals must think holistically, strategically and at the highest level to protect their organizations, starting with enterprise risk management.

BY NATHALIE SMYTH, DANIEL BRETTLER, MICHELE FIELDS, ELIZABETH J. STREELMAN, AND ANITA GORNEY

Last year, the World Health Organization called on all countries to ramp up their testing programs with a view to slowing the advance of the COVID-19 pandemic. Pharmaceutical and diagnostic companies rushed to develop diagnostic tests, some of which are alleged to be inaccurate and unreliable.

In this article, Kennedys Law and Conner Strong & Buckelew examine the liability and insurance risks of putting ‘fast-tracked’ diagnostic products on the market and how companies may be able to limit their related exposures.

CLAIMS THAT MAY ARISE FROM INACCURATE DIAGNOSTIC TESTS

Product liability claims

Claims arising from the sale, distribution and end-consumer use of inefficacious diagnostic kits in the US could arise in a number of ways against multiple players in the distribution chain:

• Strict liability of the producer for defects in the design or manufacture of a test, or for failure to warn a patient of potential inaccuracies in the result;
• Negligence of the manufacturer or supplier for breach of their duty of care to provide the recipient with an accurate test; and/or
• Breach of implied or express warranty by the producer, particularly where tests are marketed as 100% accurate.

While it is more common to see claims for false negative tests, claims may also arise from false positive results, which could cause emotional distress and financial hardship both to the end consumer and to people with whom they have had contact. Indeed, attorneys in Canada have been retained to bring a class action on behalf of nursing home residents, who received eight false positive COVID-19 test results. The plaintiffs (which also comprise nursing home staff, their close friends and family) allege that the false positive results caused them emotional harm and loss of earnings.[1]

Shareholder Litigation

Actions may also be brought by shareholders of pharmaceutical companies arising out of false and misleading statements made about the accuracy of diagnostics tests[2]

Indeed, in June 2020, an action was issued by shareholders of one of the first diagnostics companies to receive approval for the manufacture and distribution of COVID-19 diagnostic tests in the US and EU.[3]

According to the shareholder’s lawsuit, the COVID-19 test was stated publicly to be “100% effective” in detecting the virus. When the FDA later announced that no diagnostic test was 100% accurate, the company’s stock price fell, resulting in huge shareholder losses. Proceedings were issued on the basis that the company had violated federal securities laws[4] pertaining to, among other things, deceptive practices in securities trading. While the parties await the outcome of the lawsuit, it is unlikely that the liability immunity afforded by recent public health crisis legislation (discussed in further detail below) will be available to companies, which are alleged to have violated such laws.

POTENTIAL DEFENSES

There are a number of grounds on which manufacturers and players in the chain of distribution of Covid-19 and other diagnostic tests may be able to protect or defend themselves insofar as possible against the risks of such litigation.

Immunity

In 2005, in preparation for the possibility of a massive public health crisis, the U.S. government crafted the Public Readiness and Emergency Preparedness (PREP) Act, which authorizes the Department of Health and Human Services (HHS) to issue a PREP Act Declaration that:

• provides immunity from liability for, among other things, any loss caused by the administration or use of ‘countermeasures’ (including treatment and diagnosis products) to diseases constituting a risk of a future public health emergency;
• suspends multi-year testing requirements; and
• approves emergency use of desperately needed novel drugs, including vaccines.

Liability immunity under PREP extends to manufacturers, distributors, program planners[5]  and qualified persons[6] for claims arising from personal injury, business disruption, or property damage.

In March 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act extended the protections provided in the PREP Act to manufacturers of any drug, biological product, medical device or vaccine used to treat, diagnose, cure, prevent or mitigate COVID-19 or a virus mutating therefrom.

The protection is, however, not absolute as the FDA can revoke emergency use authorization when appropriate, particularly if it has concerns about the accuracy or efficacy of any such products or devices.

State of the Art

In product liability litigation, a ‘state of the art’ defense is available to a manufacturer who can prove that a product incorporates the best technology and scientific knowledge available at the time the product was manufactured. Evidence of the level of technology and lack of other advanced technology on the market at that time are key to this defense.

Given that there is still so much unknown about the novel coronavirus and its various mutations, this defense could be particularly useful to defendant manufacturers in COVID-19 litigation who can show that their testing products were developed with the best technology and scientific knowledge available at the time, against the background of urgency with which such products were required.

Accuracy in advertising

In an effort to avoid a potential claim from being brought, producers of diagnostic tests should, at the outset, take great care with the preparation of their statements as to the efficacy and accuracy of the product, not only in order to avoid the potential for shareholder actions and other claims based on reliance of such statements, but also to maintain the integrity of the product and the company.

COMPARISON WITH LAWSUITS ARISING FROM THE HIV EPIDEMIC IN THE 1980s

Comparisons can be drawn from the emergency response to the COVID-19 pandemic and the HIV epidemic in the 1980s where HIV blood screening tests were developed expediently in the face of the national health crisis.

At the time, several blood-screening tests failed to detect HIV in blood supplies later used for transfusions. As a result, patients infected with the virus filed litigation. While the consequences of these failures were tragic, the New Jersey Supreme Court found in favor of the test manufacturer on the grounds that the claim was pre-empted by the FDA’s unique regulation of the HIV screening tests, and that the tests had been developed expediently in the face of a national crisis.[7] In reaching its decision, the court took into account that the FDA had:

• actively directed the manufacturer concerning the design format of the tests;
• determined the appropriate cut-off[8];
• dictated the exact wording of the test package inserts;
• directed the manufacturer not to instruct blood banks to retest samples below the cut-off; and
• actively monitored both the ‘first generation’ tests’ field performance, and the development of the ‘second generation’ tests.

Should any similar claims be brought against manufacturers of Covid-19 tests, for example  where a patient did not seek early medical intervention and consequently died or suffered severe illness as a result of a false negative Covid test, it will be necessary to carefully consider whether and to what extent this case law, the PREP and CARES Acts, and any intervention by the FDA and similar authorities, may be relevant in the defense of such claims.

INSURANCE CONSIDERATIONS

It is important that diagnostics companies and manufacturers have in place sufficient insurance coverage for the risks described above. While these will most likely fall within the scope of a product liability policy, coverage under E&O or D&O policies may also be relevant.  For instance, companies should take great care when preparing and making representations to their shareholders and to the public to avoid any potential claims under their D&O policy.

Companies should also be mindful of the strict notification requirements contained in such policies, in order to preserve the company’s rights and to protect against a disclaimer. Policies typically provide that the company must report a claim or potential claim within a certain timeframe. If timely claim notification is not provided, the company is at risk of the insurance carrier disclaiming coverage.  Therefore, it is important to ‘loop in’ the insurer sooner rather than later once notice of a claim or a potential claim is received.

To facilitate the defense of a potential claim, companies should also have protocols in place to preserve evidence that might be pertinent to the development of their diagnostic products. For example, companies should ensure they preserve all electronic data, including proof of trials, testing and scientific research.

Given that each potential claim will bring its own unique issues and challenges, diagnostics companies and manufacturers should carefully consider the provisions and adequacy of their policies to ensure that they provide sufficient cover in the event of any and all risks, which may arise as a result of putting their diagnostic tests onto the market.

CONCLUSION

Many lessons can be learned from past litigation involving failed diagnostic equipment but, most importantly for manufacturers and their insurance brokers, it is critical to identify the policy that is triggered by a failed diagnostic claim and to notify the insurer(s) as soon as possible.

As we have seen, courts have historically been relatively lenient on companies who have expedited the development of their testing product in times of national emergency, particularly at the request of the government or its agencies.  It is therefore hoped that, in the event that similar litigation arises, the courts will afford them the same leniency, particularly in light of the protections provided by the PREP and CARES Acts.

[1] https://www.biospace.com/article/releases/miskin-law-bringing-class-action-over-false-positive-covid-19-test-results/

[2] In violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934

[3] Gelt Trading, Ltd. v. Co-Diagnostics, Inc., No. 20-cv-00368 (District of Utah)

[4] Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

[5] Individuals and entities involved in planning, administering, or supervising programs for distribution.

[6] Persons authorized to prescribe, administer, or dispense covered countermeasures.

[7] R.F. v. Abbott Laboratories, 162 N.J. 596, 745 A.2d. 1174 (2000).

[8] The cut-off value, defined by the FDA in the test’s instructional pamphlet, was used by blood bank technicians to measure whether the HIV antibody was present in a donated blood sample.

BY TIM GOSNEAR, CPCU, & ROGER LADDA, ARM

Organizations across industries are facing one of the most challenging insurance markets in decades. This hardening market is a result of rising claims costs driven by social inflation and catastrophic claims, combined with historically low interest rates and other financial factors. It’s created stress across lines of coverage, but the challenges have been the most pronounced in property & casualty and excess liability. As a result, organizations in a variety of industries are facing high premiums – if they can secure coverage at all.

In light of these challenges, many organizations are considering alternative risk transfer solutions outside traditional insurance products. Alternative risk market tools like insurance pools, parametric insurance and integrated risk programs can be meaningful solutions in a hardening market. For many companies, one alternative risk structure worth special consideration is a captive insurance program.

Captive Insurance Defined

Captive insurance is a form of self-insurance in which an insurance entity is created by an individual company (single parent captive) or a group of companies that joins together to form their own insurance company (group captive).

Rather than transferring all insurance risk to third-party traditional commercial carriers, a captive (single parent, group and/or hybrid captive structure) assumes a level of calculated risk that is priced (quantified) by a third party actuary. The banding together of affiliated companies (single parent captive) and/or unaffiliated organizations (group captive) provides risk distribution, risk diversification and ample spread of risk to operate a viable insurance company. Captive participants can contribute to a shared pool of resources rather than paying 100% of premiums to a commercial carrier. Through sound claims management and loss control, organizations can lower the costs of claims, and therefore reap financial benefits through the captive facility.

With this structure a captive insurance program offers several benefits:

• Consistency – While traditional insurance premiums are surging and coverage is increasingly hard to secure in the current hard market, captives offer more predictable and stable pricing.
• Control – Captives remove many market factors from pricing. Cost is not based on what insurance companies think they can charge, but rather what organizations predict their losses will be.
• Customization – Captives allow an organization to build more specific coverage for certain lines at certain premiums, rather than being forced into off-the-shelf policies from insurance companies. They allow for a more comprehensive approach to risk and long-term strategic thinking.

In many cases, utilizing a captive insurance program helps organizations take a more comprehensive and strategic approach to risk. They have more options in how they finance and control various risks and exposures and can take a long-term view. It lets organizations make one five-year decision rather than five one-year decisions.

What’s more, it creates added incentive for organizations to pursue additional risk management solutions such as loss control, enhanced safety processes and more. Organizations in a captive have an opportunity to share best practices, resources and more in pursuit of reducing claims and lowering costs.

Finding the Right Captive Insurance Partner

As organizations consider the switch to a captive insurance structure, it’s important to approach the process in the right way. In most cases, a broker can be a vital partner in navigating the transition to a captive insurance program. Yet not all brokers offer the same set of services and expertise, especially when it comes to captives and alternative risk transfer. Here are three traits to look for in a true partner in determining if a captive is the right move for your organization.

1. An Objective Perspective

Many brokers have a vested interest in pushing clients toward or away from captive insurance structures. Smaller brokers typically don’t have the capabilities to handle captive services in-house and will have to find an outside consultant to oversee the process. Larger brokers may have the capacity to tackle structuring a captive, but most charge a premium for the service. In either case, the client ends up picking up additional costs. Large regional brokers like Conner Strong & Buckelew take a more consultative approach. Captive insurance is one of a host of risk management solutions, and it’s presented as an option because it could benefit the client’s business, not the broker’s.

2. A Collaborative Approach

If the captive approach makes sense for the business, the right partner can help move through the process of establishing or joining the captive. It can be a complex process that typically requires a combination of execution and education in helping clients make the right decisions. That approach necessitates a deeper understanding of a client’s business goals and priorities with an eye toward key industry considerations.

3. A Track Record of Success

Building a successful captive insurance program requires partnership. That partnership extends beyond the organization and the broker to include captive managers and administrators, actuaries, tax experts, auditors and more. These partnerships must also be objective and collaborative to deliver the best outcomes. The right partner should have a vetted network of support in these areas and a proven track record of helping similar organizations make the transition to a captive structure.

Making the Switch in a Hard Market

Today’s hardening market has prompted organizations of all shapes and sizes to rethink their approach to risk. In situations where traditional insurance has become untenable, captives are an option worth exploring. Many organizations that have already made the switch are now finding increased control and savings as tough market conditions persist. The right broker partner can help your organization find creative solutions in a challenging market.

To learn more about captive solutions in a hardening insurance market:

Please contact a Conner Strong & Buckelew representative.