Why Do Roofing Contractor Owners Choose Captives?

By Heidi J. Ellsworth, RCS Partner.

Shelly Duhaime of NFP, a leading roofing industry risk expert, shares important reasons to choose an insurance captive.

As roofing contractors look to control costs across their companies, one of the key areas for cost control is insurance and risk. Shelly Duhaime, vice president of NFP’s captives practice, has worked with roofing contractors for over 20 years, in the role of risk management and alternative risk financing specialist. She has represented roofing contractors all over the country, with exposures in about every state, handling everything from workers' compensation to difficult construction defect claims in strict jurisdictions in New York and California.

Now with NFP, Shelly is working with one of the top 10 insurance brokerages in the country. They have a very large segment of business in the benefits space and excel in that arena but are also strong players in the property and casualty arena. “We are expanding and growing in the P&C side of the business by hiring top-quality leaders to lead that practice,” stated Shelly. “I lead the captive insurance practice for NFP, and it is truly a great organization. The culture and leadership are extraordinary. I've worked for quite a few brokerages over my time, and it truly is a people-first culture.”

Shelly will be focused on developing insurance captives for roofing contractors. She explained what captives are: “A captive is owning your own insurance company. When you decide to go with a captive as your alternative risk financing, you're basically starting your own insurance company.” There’s flexibility in the arrangement. She says, “You can do that as an individual company, pure captive, or you can do it as a part of a group captive.”

Much of the day-to-day remains the same. According to Shelly, “Basically, what you're doing is you're paying your premium as you do today,” she notes. “If you're in a guaranteed cost program, you pay your premium in as a guaranteed cost, and then you're basically putting your premium in buckets. There's a bucket to pay your losses and there's a bucket to run the insurance company that has all the expenses in it, and you earn investment income on your bucket that's waiting to pay claims, until you actually pay claims.”

A major benefit is the potential to earn income on the premium: “Even if you have a reserve on the books for a back injury or a shoulder, until the insurance company cuts that check, you're going to get investment income on that money. It gives you the opportunity to keep the underwriting profits for yourself or group and earn some investment income on those underwriting profits.”

Shelly shared these top reasons roofing contractors should consider captives:

1. Have the opportunity to earn investment income on loss funds and to maintain underwriting profits for their own companies.

2. Negotiate predetermined premium and collateral formulas with the fronting insurance carriers which support structure, tax and investment programs all decisions made by the owner(s).

3. Fund their own actuarially determined losses while reinsuring catastrophic exposures

4. Experience greater cost predictability insulating their organizations from insurance premium volatility when the insurance marketplace attempts to stabilizing industry CAT losses through increased premium across all policyholders.

5. Enjoy the benefit of unbundled services- service providers work directly for captive owners, promoting claim management, loss control and cost efficiencies.

6. Experience claim portfolio improvement by having greater control of claims, “it’s their money” not the insurance companies.

7. Select your own attorneys, investigators, expert witnesses and other experts which support overall claim mitigation plan.

8. Design specific loss control programs for their company while instituting measurable and accountable protocols reducing loss and injury rates.

Shelly emphasized the necessity of an engaged risk management partner, saying, “In an effort to provide alternative risk management insurance options to our clients we provide consulting expertise at every stage of a captive’s evolution.” In order to guide organizations to the optimum outcome, NFP offers comprehensive risk management consulting services:

Services for Existing Captives

• Independent reviews of existing captive structures
• New product design and build as an add on to existing programs
• Process management of loss portfolio transfers
• Novation process management
• Consultations on repatriation, program shut down, or run-off strategies
• Audit of loss control performance and claim portfolio management
• Service provider review for service to fee appropriateness
• Accountable loss control program design and implementation

Services for New Captive Programs

• Education surrounding the captive mechanism and feasibility considerations
• Feasibility study execution — analysis of captive structure as a feasible option for your organization or group
• Design and pre-construction of group captive programs currently under construction:
  • Commercial and residential roofing program
  • Medical stop loss and deductible program
  • Heterogeneous group program for repatriation
  • Multi-trade subcontractor program
• Association program design and build for captives and guaranteed cost programs

“With all the changes in tax law and the growing challenges in dealing with labor and risk, now is the time to look at taking control of your insurance needs through a captive,” concluded Shelly. “I am so happy to be with NFP and be able to offer state of the art opportunities for roofing contractors, many who I have worked with before. It is an all-around win for everyone.”

For more information visit www.nfp.com or reach out to Shelly directly at shelly.duhaime@nfp.com.

We are also proud to have Shelly as an RCS Influencer and you can find her articles here.