McGriff
Reinsurance Broker Firm—Highly Commended Reinsurance Broker Individual—Highly Commended
The right fit
For more than a century, McGriff has focused on building long-term relationships to deliver innovative insurance solutions. Alina Virnik and Lea Riddle of McGriff illustrate some of the risk management solutions the firm has delivered to clients.
“The captive solution allows our client to strategically fund the deductible exposure and establish reserves for future losses.”
Lea Riddle & Alina Virnik
McGriff
At McGriff, we have a dedicated team that advises clients who may be interested in captive or alternative risk transfer (ART) options.
Our goal is to provide support and expertise so that our clients have the knowledge and confidence to choose a risk management solution that best fits their organisation and management philosophy. McGriff offers a full range of risk management services to captive clients, including:
- Actuarial services and analytics
- Holistic risk management
- Captive feasibility studies
- Risk control
- Fronting, reinsurance, excess placement
- Claims advocacy
McGriff does not provide captive management services, as we prefer to focus on brokerage, analytics and risk management solutions. We believe that our clients benefit from having an option to choose a captive manager with industry expertise and is the leader in the domicile of choice.
Over the years, we have developed strong partnerships with the leaders in the captive insurance industry, and we partner with them to help clients reach goals set for the captive.
Below are three examples that illustrate how McGriff delivered successful risk management solutions to clients with the help of captives.
Single parent captives
Example one
Business issue: A homebuilder/developer had a robust safety programme and a proprietary process for significantly reducing the likelihood of construction defect claims. The success of the programme was evident by its incurring only $55,000 in incurred claims during five years, and no construction defect claims.
They were paying $400,000 per year for their general liability insurance ($1 million per occurrence and $2 million aggregate), and despite excellent results, fewer markets were available and renewal premium was increasing.
Solution: McGriff recommended setting up a single parent captive. We helped our client select a captive manager and other captive service providers, and supported them through the captive set-up process. Under the new arrangement, the client retains the first $250,000 of any claim up to a $1 million aggregate. In return, the AM Best A-rated carrier cedes 54 percent of the premium to the captive. Annual captive operating expenses are under $50,000.
Results: The client is recouping approximately $150,000 per year in underwriting profit, after expenses, and before the investment income. More importantly, our client now has the carrier who sees it as a long-term partner. Additionally, they gained control of the claims process through the partnership with the third-party administrator McGriff helped vet and engage.
Example two
Business issue: The business operates 500 convenience stores in 20 states and employs 1,400 individuals. Approximately $20 million of the client’s significant real estate holdings is coastal. It was retaining 3 percent wind deductible, despite never having incurred a wind loss.
The client has a significant environmental exposure, and was purchasing environmental insurance in the standard market, but was frustrated by claim denials. It also carried a $175,000 medical stop loss policy on its group health insurance, and participated in a group captive for workers’ compensation, general liability and auto exposures.
Solution: McGriff proposed a single parent captive solution to stabilise and enhance the risk management programme. We helped select the captive manager and other captive service providers, assisted with data collection for the feasibility study, and provided support during the captive set-up process.
Currently the single parent captive provides the following coverages to the parent organisation: a deductible buy-down coverage for the wind exposure, property difference in conditions (DIC) policy which includes enhanced business interruption coverage, and the environmental DIC with a deductible buy-down policy.
We created a contractual liability policy for the possibility of an assessment from the group captive which insures workers’ compensation, general liability, and auto exposures. In addition, the client purchased a reimbursement policy for a corridor between a deductible and the aggregate on the medical stop loss group health insurance plan.
Result: The captive solution allows our client to strategically fund the deductible exposure and establish reserves for future losses.
They also gained control over the claim management process, which was tested when one of the stores was temporarily closed due to COVID-19 exposure. Captive property DIC coverage covered the $10,000 cost for the environmental contractor to disinfect the store
Group captives
McGriff has strong relationships with many homogeneous and heterogeneous group captives and their managers. We make sure that our clients understand the impacts of the long-term commitment to the group, the benefits and the risks associated with joining a group captive.
We match the client’s risk appetite, risk profile and management philosophy to the attributes of a group. As a result, many of our clients experience long-term stability, premium savings, return of underwriting profit, and reduction in claims after joining a group captive.
Example three
Business issue: A refrigeration contractor, having become frustrated by rising insurance costs, came to McGriff seeking an alternative solution.
Despite a solid safety record, the fluctuations in the standard insurance market made budgeting for the insurance expense difficult. They needed a long-term plan for controlling rising costs, and a solution that reflected their commitment to safety.
Solution: In 2011, McGriff facilitated the placement of workers’ compensation, general liability, auto liability and physical damage coverages with a heterogeneous group captive.
Results: Since joining the captive, the company’s payroll has grown 5 to 8 percent annually and their fleet size has doubled, but premium has remained relatively flat, and their rate has been declining due to excellent loss experience.
The company has significant input into the claims management process resulting in lower total claims costs. They have achieved an average loss ratio of 40 percent and have had no major accidents in the last eight years. The client has seen a substantial return of underwriting profit and has built up equity for future distribution.
Alina Virnik is captive operations manager at McGriff. She can be contacted at: avirnik@mcgriff.com Lea Riddle is an insurance producer at McGriff. He can be contacted at: lriddle@mcgriff.com
