Layer Coverage

August 05, 2014

SpringLogo-homepageOur thanks to Karin Landry at Spring Consulting Group for supplying this helpful answer.

There are a number of fronting companies who are willing to support health stop loss coverage in captives.  Many current insurers will work with captives. In fact, the market for health stop loss and 831(b)s are growing and prevalent. Also, if you have a group of clients, a group captive may be an option for you. 

Aside from the captive's structure, there are a number of questions you will need to answer that will weigh heavenly on the appetite of the front company:

  • Is it an ERISA or non-ERISA plan? Will employees contribute towards the coverage? If so, you may need to interact with the DOL to make sure the program is compliant.
  • Who will be the captive owners and how do you intend to capitalize the captive?
  • Will you want the front to provide an aggregate cover over the stop-loss layer?
  • What sort of credit rating will you require of the front company?
  • Who will perform the actuarial loss pick/rates, and what is the qualifications in this area?
  • What domicile are you looking at?  What are their requirements?
  • What is the driving force behind the 831(b) election, and is there a valid business purpose?

In short, there are carriers out there who are willing to provide front services for medical stop loss coverage.  However, some carriers have learned the hard way to ask more questions and be selective in whom they work with.  One of the keys here is to first have a valid business purpose for forming the captive, then identify what election to select for the captive.  Carriers are more skeptical when done the other way around.  There are quite a few decision points and variables involved in setting up such a captive, most which are fairly specific to your goals and particular situation.  Please don't hesitate to reach out to our team at Spring Consulting. We are always ready and willing to discuss what you are looking to do and what your captive options may be.

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Contact information:

Karin Landry
Managing Partner
Spring Consulting Group, LLC
84 State Street
Suite 500
Boston, MA 02109

Ph: 617-589-0930
Fax: 617-589-0931
E-mail Karin Landry

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