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Risk Retention Group Success Story Presented in South Carolina

Doctors Surgeons
September 28, 2015

A presentation during the 16th Annual South Carolina Captive Insurance Association (SCCIA) Executive Educational Conference, held September 21-23, 2015, in Charleston, featured the success story of OrthoForum Insurance Company (OFIC), A Risk Retention Group, one of the 161 active captives domiciled in the state.

The case study presentation was given by Dr. Mark Fahey, OFIC board chairman and an orthopedic surgeon; Patricia Brewster, OFIC board member and chief executive officer; and Anne Marie Towle, senior vice president and senior consultant at Willis Global Captive Practice.

The development of a risk retention group (RRG) is more often than not a short-term process. The OFIC presentation, which is one of the 2015 conference presentations available for viewing on the SCCIA website, described the evolution of the company. A committee of 8 members took 2 years to complete the three-stage due diligence process, the presentation states. According to an article in the first quarter 2013 issue of the SCCIA's Captive Insurance Journal, OrthoForum members in 2008 began exploring how they could leverage the size of the regional member orthopedic groups. A preliminary review of data from 20 of 65 members in 2009-2010 was an impetus to engage Willis to perform a formal feasibility study in 2011, the article states. That feasibility study included a review of captive structures and possible domiciles, the article states, and in 2012 OFIC was licensed in South Carolina as an RRG. The presentation states that an RRG enables the company to more readily have members in multiple states and provide medical professional liability coverage on a direct/nonfronted basis.

Since its inception in 2012 with 14 orthopedic practice owners and 350 physician and midlevel insureds, OFIC has grown to its current 20 orthopedic practice owners and more than 950 physician and midlevel insureds, according to the SCCIA presentation. The Demotech, Inc., Analysis of Risk Retention Groups Year-End 2014 reported that OFIC had direct written premium of $7.8 million, net written premium of $5.7 million, and member equity of $3.5 million. Net income for the year ending December 31, 2014, was $203,049 with a loss and loss adjustment expense (LAE) ratio of 70 percent and an expense ratio of 24 percent, Demotech reported. The company has writings in 12 states, with only one state—New York—representing more than 20 percent of the total writings, according to the SCCIA presentation.

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