Are You Ready For A Captive?

1. AGC / CFMA Conference Self Insurance with Sophistication Are You Ready for a Captive? October 23, 2008 Mark Ouimette, ARM [email_address]

3. COST TIME PREMIUMS 1970 1975 1980 1985 1990 1995 2000 2005 2010 LOSSES Market Cycle Impact: Premiums Compared to Losses

4. Growth of Captive Industry* 1970-2008 *Captive Insurance Company Reports Estimate 1970 1975 1980 1985 1990 1995 2000 2005 2010 0 1000 2000 3000 4000 5000 Captive Growth Market Cycle

17. Captive Utilization By Industry Source: Marsh Survey Group Manufacturing 10% Financial Institutions 20% Construction 6% Chemicals 3% Aviation and Aerospace 2% Other 7% Automotive 2% Health Care 11% Life Sciences 3% Mining, Metals and Minerals 3% Power & Utilities 8% Real Estate 3% Retails and Consumer Products 10% Technology & Telecom 6% Transportation 6%

20. Hypothetical SIR/Deductible Structure Captive Contractor Insured Excess Insurance Policy $0 $1M SIR $9M Pays Premium Issues Policy Issues Policy Common Ownership Pays Premium

21. Contractor Insured Captive Reinsurer Common Ownership Policy(s) Issued May Purchase Coverage Hypothetical Direct Write Structure Pays Premium

23. Insured Contractor “ A” Rated Ins. Co “ Front” Captive Reinsurer Issues Policy Acts as Reinsurer Common Ownership Hypothetical Fronted Structure Pays Premium Cedes Premium Less Front Fee May Purchase Coverage

26. Domicile Chart Source: Marsh Survey Group Bermuda, 25% Cayman Islands, 12% Guernsey, 6% Ireland, 5% Isle of Man, 3% Luxembourg, 12% Singapore, 3% U.S. - Hawaii, 5% Sweden, 3% U.S. - Vermont, 15% Other (U.S), 6% Other, 5%

33. Typical Structure Captive Insurance Company Issues Policies, Collects Premiums, Disburses Funds to TPA, States, and Feds Insured(s) Domicile Regulator Captive Manager Corporate Legal Counsel Auditor & Tax Bank & Investment TPA Claims Board of Directors Actuary