NOTES FROM KING STREETQuarterly Newsletter from Energy Insurance Services, Inc., Volume 2, Issue 4November 15, 2018In this Issue:View from theCornerCaptive OptimaOperationalConsiderationsEIS Financials &OperationsView from the CornerWe were pleased to host eleven of our fifteen active Mutual BusinessPrograms at our annual Program Advisory Committee conference. This yearour venue was across the harbor at Patriots Point. From initial feedback,nearly all attendees enjoyed the Harbor Resort accommodations and meetingspaces. The specific PAC meetings, as always, were very informative. These meetingsgenerate new ideas, provide EIS/ECM with updates of our participants’ companies, identifyprocess efficiency improvements and the tactical and strategic direction our participants aremoving towards in their Mutual Business Programs.Our general sessions addressed a variety of operational topics from regulatory processes, auditand tax update, new products, and captive insurance strategy case studies. Speakers includedJay Branum, Director – Captive Division of the South Carolina Department of Insurance; AnnConway and Jim Swanke of Willis Towers Watson; Evan Busman and John Kelly of HanoverStone with Steve DiCenso of Milliman. Correlation of risk was a central theme and was cappedwith Karin Landry’s presentation how mixing employee benefits exposure with p/c businessdemonstrated the highest degrees of risk predictability and risk financing efficiency.As with every year, several dinners and activities were hosted by EIS. These events allow ourparticipants and other attendees to network and discuss the business of being a captive user.All presentations have been posted to the EIM website. Next year we have our venue and datesset. Please get ready to join us at The Sanctuary at Kiawah Island, November 4 – 7, 2019!
Captive OptimaIn the June newsletter, this section focused on why and how captives usereinsurance. Much emphasis was placed on the financial efficiency of thesearrangements. Today, we are going to discuss process efficiency via ‘a bestpractices’ approach for an EIS participant. EIS sees this as a multi-phasedprocess. We will assume the participant will BYOB (bring their own broker) to their protectedcell reinsurance engagement.Exploratory PhaseThe beginning of any insurance orreinsurance program involves understandingthe issues. Whatever the reason to seekreinsurance, the participant needs to knowwhat is possible in the market. An efficientmeans, in many instances, is to engage atrusted broker to help quantify the risk andestimate the market appetite. At EIS, weconsider the exploratory stage from thisbeginning up to and including approachingmarkets for coverage and pricing indications.PAC Recommendation PhaseOnce the participant becomes satisfied a viable opportunity to utilize reinsurance in theirprotected cell exists, a couple recommendations need to be provided by the PAC to EIS. First, a PAC recommendation to EIS to engage the broker for placement of a reinsuranceprogram. This may entail EIS entering into a brokerage agreement or engagement letter asoutlined in the PAC recommendation. Other reinsurance brokerage compliance documentationis sometimes required by the broker.Second, a PAC recommendation to bind reinsurance by EIS is needed. This usually follows whenfirm terms and conditions with pricing is acceptable to the PAC.EIS Execution PhaseAt this point, all is ready to go. With a PAC recommendation in hand, EIS directs the broker tobind coverage for EIS on behalf and for the benefit of the specific MBP. If this is a 100% passthrough placement for a single policy issued by EIS, then EIS will invoice for their issued policyto the insured (participant) and then pay the reinsurers and the placing broker any commissionor fees as recommended by the PAC.
Operational ConsiderationsIn a perfect world, there would be no claims filed against yourpolicies and the premiums paid into your cell would simply buildsurplus for advanced risk leverage. However, we know the world isnot perfect, and we know that claims occur. Therefore, as 2018 comes to a close, now is agreat time to review the claims handling procedures within your cell for the new year.When you have received notice that an event has occurred which may impact your entity, youshould perform an analysis to determine if the claim might be covered by the policy placed inyour cell. If it is determined that this claim is covered by your EIS policy, you must notify EIS.EIS will then provide notice to any participating brokers and reinsurers on risk for this claim.There are other considerations at issue. Your EIS policy may include claim notice provisionsthat will govern when and to whom notice should be given. Many EIS policies include claimnotice provisions that conform to requirements of coverages that are underlying or excess ofyour EIS policy. In addition, the PAC must keep in mind notice provisions to reinsurers of EIS.Once the notice has been formally sent, and an adjustor has been engaged to investigate theclaim, EIS will await a conclusion from the adjustor and/or any legal counsel that has beenengaged to assist in arriving at a settlement on the claim. EIS will also ensure that theappropriate reserve recognition has been recorded based on a PAC recommendation. Oncethe claim has been settled, a proof of loss (or other appropriate documentation, as needed)must be sent to EIS with a PAC recommendation to process and pay the claim.Next, EIS will review the documentation and recommendation from the PAC and determine ifpayment is justified. This proof of loss will then be presented to the participating broker andreinsurer from EIS. Once, EIS receives payment from the reinsurer, EIS will make the claimpayment to your entity, net of subrogation. EIS can also pay the adjustor/legal counsel utilizedin this process in whole or in part according to the requirements of the policies and (re)insurersresponding to the claim. This example includes involvement by brokers, reinsurers, adjustors,and legal counsel, but if your particular situation does not involve some or all of thoseparticipants, then their role can simply be omitted.
Our goal at EIS and ECM is to perform streamlined adherence to these points and anyprocedural instruction that a PAC puts into place so that you receive the most effective relieffrom the pressure that dealing with claims can cause. A single electronic notice to EIS thatincludes simultaneous notice to reinsurers and brokers is one means of simplifying the process.If there is any interest in creating a more formal claims handling procedure within your cell or ifyou simply want to gain clarity on the topic, please contact us. We will be happy to improveyour claims handling in any way that we can.EIS FinancialsEnergy Insurance Services, Inc.General Account - Key Financial DataAs of September 30, 2018First 3 Quarters2018 YE201720182017ForecastBudgetActualRevenue 1,836 1,789 2,444 2,329 2,391Expenses 1,266 1,275 1,757 1,835 1,768Surplus 3,373 2,873 3,474 3,324 2,934(In thousands)
Save the Date!EIS ANNUAL PAC CONFERENCE NOVEMBER 4 – 7, 2019THE SANCTUARY KIAWAH ISLAND, SCDisclaimer – This publication is for informational purposes only. It is not a solicitation ofinsurance or management services.Energy Insurance Services, Inc.409 King Street, Suite 201Charleston, SC 29403www.eimltd.com/EISEIS Mission Statement – “To provide a facility to meet EIM Members’ dynamic and specificbusiness requirements for the placement and management of alternative risk solutions.”Contact Us:Randy Martin [email protected] Ragland [email protected] to unsubscribe