Spring Consulting Group, LLC - Our Captive Experience

Vision.

Captives are increasingly becoming a significant risk management and employee benefits funding tool for employers, associations and other purchasing groups. For commercial insurers and third party administrators, captives present new product and service opportunities. The Internal Revenue Service recently shed some light on tax treatment of captives, making them more attractive alternative risk solutions. The Department of Labor outlined a roadmap for employers to follow in order to fund their employee benefits through their captives. The converging views of various regulatory bodies and insurance market fluctuations, coupled with companies entering and exiting markets is making captive insurance an increasingly attractive option.

SPRING CONSULTING GROUP, LLC

Vision. Insight. Results.

Captive Experience - Our Vision. Insight. Results.

Insight.

Although captives might not be the right solution for every organization, it is the right thing for many. Determining the feasibility of a captive requires an in-depth qualitative and quantitative analysis of the concept, extensive knowledge of various moving parts of the captive environment and an experienced team of experts. Moreover, implementing and managing a captive requires a captive owner’s commitment – it is not a short term solution.

At Spring Consulting Group, LLC (“Spring”), we understand these issues and guide our clients with our experience, creativity and professionalism throughout the captive feasibility, analysis, and implementation process. Once a captive is operational, we assist our clients with their ongoing actuarial, administration, consulting and insurance brokerage needs. Our consultants and actuaries have significant captive consulting experience in the areas of employee benefits, property & casualty and life insurance in both the U.S. and abroad. Their excellence is evidenced by our success in getting favorable IRS and DOL treatment for unique client situations. Regardless of the challenges and complexities of your situation, be assured that our singular goal is to enable you to achieve yours. Here are some examples of how:

Determine the feasibility of a captive solution for your organization:

· High-level assessment of coverages considered – To deliver the highest value to our clients, we review all the coverages considered for funding at a high-level, identify those that are suitable for captives, and agree to further analyze selected coverages.

· Comprehensive captive feasibility analysis – We conduct a detailed quantitative and qualitative analysis of the selected coverages to determine whether and how a captive solution makes sense for your organization.

Design and implement your captive solution:

· Layout the blueprints for your solution – If it has been determined that a captive solution will meet your needs, we will work with you to develop the program design and the necessary financial modeling.

· Putting your plans into action – We can also help you with the implementation of your captive solution by preparing necessary captive domicile applications, navigating through the DOL and IRS application process, and/or identifying third party service providers as needed.

Ensure the long-term success of your captive:

· Ongoing support – Once your captive is up and running, Spring can provide ongoing employee benefit administration, actuarial support, captive expansion assistance and other necessary periodic reviews. Our structure allows us to be flexible in working with your existing captive manager or provide services outright.

Results.

The true value of advice is in the results. Here are some examples of Spring clients who have achieved measurable value, driven by our vision, insight and results orientation.

Worked with a Utility Company to Fund their Disability Program – Spring provided consulting and the actuarial work for a solution using the client’s existing offshore captive insurance company to establish a U.S. branch with the employer maintaining the Long-Term Disability plan. The admitted insurance company insures the plan and reinsures the risk to the U.S. captive branch. Critical success factors were the demonstrated benefits to employees, the expanded options for the

employer, and the use of top rated insurers. The project also ensured competitive premium calculation. This enabled the client to bypass the DOL’s 1979 rule that 50% of the captive’s business must be third-party risk.

Chemical Industry – We were successful in obtaining a DOL advisory letter allowing one of the largest chemical companies in the United States to use their Bermuda reinsurance facility for their Group Term and Universal Life programs focused on funding Life and Retirement benefits.

Utilities – We established an innovative offshore rent-a-captive to fund Retiree Medical for a group of utilities. This involved a private letter ruling, the granting of life insurance tax status to health policy, and a determination by the IRS that there were no constructive receipt issues. The utilities saved more than $30 million.

For another utility company we assisted with the development of an offshore Retire Medical funding program that involved a large contribution of the client’s common stock to the Retiree Medical trust and the payment of premium for the policy with their stock. We developed a policy structure and premium payment schedule to best meet the client’s goals; worked with internal counsel to use company stock for a substantial part of the trust contribution and premium payment; and managed the implementation of the program, including the identification of an appropriate offshore insurers and procurement of insurance through competitive bidding and negotiation.

Enhanced the Use of a Supermarket Chain’s Existing Captive – Spring worked with the client to identify additional coverages that could be effectively funded through their existing property and casualty captive. We analyzed a full array of employee benefits, concluding that their Supplemental Pension Plans and Deferred Compensation programs could be funded in the short term, and an integrated approach to Workers’ Compensation and non-occupational disability could be considered in the long term.