A risk-reward model, strong risk management and member engagement are
all key to the success of a medical stop loss group captive, as Joe Parrilli
and Jim Merkel of Captive Resources explain to US Captive.
Against a backdrop of increasing health insurance costs, the idea
of banding together and taking control of costs is increasingly
appealing to corporates, which are moving away from the
traditional market and starting to explore the group captive model.
To be successful and outperform the traditional marketplace,
incoming members need to be a good fit—they must be engaged and
know that the group captive structure is right for them.
This is according to Joe Parrilli, vice president, and Jim Merkel,
senior vice president, at Captive Resources, which advises a group
medical stop loss captive, currently with 83 members.
The captive has so far been profitable every year over a seven-year
period, and Captive Resources estimates that there will be around 100
member companies in the captive by next year.
Reasons to be cheerful
Parrilli and Merkel believe the success of the captive programme has a
number of drivers, the first and foremost being its conservative approach.
“We take a risk-reward approach, before there’s any type of risk
sharing with other members. It may be a little different from other
models out there in the marketplace,” says Parrilli.
As a result of this risk-reward model, the captive’s typical prospects
are going to be financially strong, and will have to give a few things up
front, for example, posting some collateral for the risk.
Merkel adds: “The companies that are coming in know they’re
going to become owners of this company; it’s going to be their money.
As they get into this pool, there is a culture that they have to drive
results not only for themselves, but also for the other members—
their partners. So you could say there’s a kind of peer pressure to
Merkel explains that these requirements and expectations in essence,
are seen as barriers to acceptance into the captive, and eliminate some
companies from consideration—but in the end that protects the whole
group and therefore its pool of customers.
The employers that typically join this group have more than 100
18 US Captive 2018 www.captiveinternational.com