Captive Provides Health System With

Greater Coverage and Savings

Lockton was approached by a large Midwest health system to find alternatives to the commercial insurance market for its
employed physicians. The system had grown weary working with the commercial insurance market and wanted more control
in handling claims.

The Lockton team quickly decided the best option was to set up a captive in the form of a risk retention group (RRG), due
to state regulatory requirements on the type of captive that could directly write medical professional liability risk.In this
structure, the RRG produced favorable results and sizeable surplus that would have otherwise been commercial insurer profit.

Fast forward to the present, where the subsequent growth of the health systems employed physician population created an
increased premium, and in turn, a sizeable premium tax liability.Again, the system looked to Lockton for guidance.

To fix the issue, the Lockton team suggested a separate captive to reduce the risk retained in the RRG.In this structure, the
premium costs and risk for each physician would be split between the captive and the RRG, reducing expenses and increasing
potential surplus while still simplifying the overall insurance program.

Through the captive/RRG collaboration, the health system reduced the premium tax liability by transferring a portion of risk
away from its RRG and into its captive where the domicile does not require a tax.

The combination of captive structures enabled the health system to not only reduce the tax liability but to create further
opportunities that use the captive. Other lines of coverage are now being placed in the captive to reduce the future impact on
operations in the event of a disruption in the insurance market that would cause premiums to increase.

As a result, Lockton provided the client with exactly what it wanted: reduced
insurance costs and more control of their insurance program.

L O C K T O N C O M P A N I E S
2015 Lockton, Inc. All rights reserved.
u:\ips\success stories\2015\St. Lukes\St. Lukes Success Story.indd: 9662