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ILLINOIS CAPTIVE & ALTERNATIVE RISK FUNDING INSURANCE ASSOCIATION

Workers Compensation and Multi-Line Pools

Definition

The growth of self-insurance for property and casualty coverages has moved beyond the major corporations and is now being utilized by smaller public and private entities, both profit and non- profit. These entities, while not large enough to self-insure on their own, have found that by grouping together with similar or related entities, they too can enjoy the benefits of self-insurance as a captive. (Some states also permit pooling of non-similar or heterogeneous groups).

Advantages:

  • Lower fixed costs than conventional insurance plans.
  • Investment income.
  • Share in underwriting profits.
  • Improved coverages and limits.
  • Access to excess and reinsurance markets.
  • Greater cost control through claims management and loss prevention.


Disadvantages:

  • Increased administration.
  • Joint and several liability.
  • Possible membership assessment.
  • Ongoing reporting and compliance with insurance regulators.
  • Financial reporting and security requirements.


Pooling of all or some lines of property and casualty coverages is now permitted in over 30 states. Compliance with state regulatory bodies is required.

To establish a pooling program the following is essential:

  • A feasibility and actuarial study.
  • Establishment of a legal operating entity, e.g. trust or captive.
  • Application to appropriate insurance regulators for approval.
  • Establishment of Board of Trustees.
  • Creation of an administrative entity for underwriting, rating and sales.
  • Creation of claims, loss control and information services entity.
  • Placement of specific and aggregate excess insurance or reinsurance.

 

Back to ICARFIA Home page

Send E-Mail to ICARFIA for more information

2003 Contact Information:

Chad Kunkel
Gallagher Captive Services, Inc.
Two Pierce Place
Itasca, IL 60143
630-285-4176
630-285-4000 (fax)
chad_kunkel@ajg.com

 

 
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