Frequently Asked Questions

• General and Overview Questions
• Risk Questions
• Pricing and Expenses Questions
• Underwriting Questions
• Contributed Surplus Questions
• Accounting and Reporting Questions
• Documentation Questions

1. What is a captive insurance company?

A captive insurance company is an insurance company that provides insurance to and is controlled by its owners.

2. Are captives a mainstream product?

• In 2008, there were more than 5,200 captives world-wide
• Almost half of the 1,500 largest companies in the WORLD own a captive
• From 1980 forward, captives have grown six-fold no matter what the market cycle has been
• More than 40% of major US corporations have one or more captives in place
• The alternative risk transfer vehicles (such as captives) make up more than 30% of the commercial risk market.

3. What is the key difference between a standard market insurance program and a captive insurance program?

In the standard market, risk is transferred to the insurance company which retains all the financial benefits of good loss performance. A captive insurance program allows its participants to assume a portion of their own risk permitting participation in profits resulting from good loss performance and investment income and some control over the terms of the insurance offered.

4. What is the Trowel Trades Industry Insurance Company?

The Trowel Trades Industry Insurance Company (the "Captive" or "Trowel Trades") is a Vermont domiciled mutual captive insurance company sponsored by the International Union of Bricklayers and Allied Craftworkers ("BAC") and owned exclusively by BAC and participating signatory contractors. Trowel Trades provides workers' compensation coverage for BAC signatory contractors through State National Insurance Company ("State National") and ULLICO Casualty Company ("ULLICO Casualty").

Trowel Trades will reinsure a portion of each contractor's risk insured through State National and ULLICO Casualty, permitting participants to decrease the cost of insurance through the return of profits typically retained by a traditional insurance company.

BAC formed Trowel Trades because it believes in the excellent craft and safety training of BAC signatory contractors' employees, and the important role that training plays in reducing the probability of on-the-job accidents. Trowel Trades offers the opportunity to realize profits on the lower probability of on-the-job accidents, so participation may result in a lower cost for workers' compensation coverage. This savings may position BAC signatory contractors to bid on jobs more competitively, win contracts, and support the growth of the unionized masonry-trowel trades industry.

5. Is a captive program the same as a Risk Retention Group (RRG)?

No. Trowel Trades is not a Risk Retention Group, and its participants will receive policies from State National or ULLICO Casualty. Both companies are licensed and admitted, regulated, and A.M. Best rated.

6. Am I eligible for the program?

BAC signatory contractors with strong risk management and safety programs, and good historical losses are eligible.

7. Will all of my employees be covered? How will the captive work for contractors that are signatory with other trade unions? Would participation mean that their workers would have to be covered by separate insurance companies for workers' compensation coverage, depending on which union their employees are members of?

The insurance policy will cover all of your employees and will respond to claims in a similar fashion to other workers' compensation policies. Typically, a contractor's employees from other trade unions would be included if the contractor meets the criteria to participate (i.e., BAC signatory masonry-trowel trades contractors with strong risk management and safety programs).

8. Will I receive an insurance policy?

Participants will receive a Workers' Compensation Policy issued by State National, rated "A" (Excellent) or by ULLICO Casualty, rated "B+" (Very Good). Both ratings are by A.M. Best as of 12/31/08. The policy will be similar to your current workers' compensation policy, and will utilize the company's filed rating plans, which vary by state.

9. Will the insurance policy reflect different rates for types of work performed or do all the participants receive a policy with the same rate?

Policies will be rated based on the different types of work performed by job classification. Each type of work is assigned a separate class code and corresponding rate. Policy premium is determined by multiplying the class code rate by the salary (per $100 of payroll) for the policy period.

10. What does it mean to participate in risk?

Trowel Trades will reinsure, or assume on behalf of its participants a portion of the risks insured by the policies. If loss performance is better than expected, Trowel Trades will be able to profit and share these profits with its participants. Some larger participants will be asked to contribute surplus to Trowel Trades. All will have an opportunity to share in profits. In that way, participants share in the outcome of the group's underwriting performance.

11. Can I use my own insurance agent or broker?

Yes, the program is designed to include the services of an agent or broker. You may use your own insurance agent or broker or, if you do not have one, ULLICO Casualty can assist you in locating one in your area that has captive experience.

12. Will each participant retain their individual experience modification, or will the participant be assigned a group experience modification?

Each participant will retain its individual experience modification. Since each is issued a separate policy instead of a group policy, past claims experience for each individual participant is kept separate from others.

13. Are loss control services provided under Trowel Trades?

A participant's access to and use of sound risk management and loss control is fundamental to the success of the Trowel Trades. Participants are expected to maintain, as well as continually improve and refine, risk management and safety programs. ULLICO Casualty, or its designated representatives, will provide loss control services to the participants.

14. Will my financial and insurance information be shared with the Union or with other contractors?

Your confidential information will only be shared with ULLICO Casualty and State National, unless otherwise authorized and will not be shared with BAC or other contractors. Aggregated loss and non-identifiable claims information may be used in loss control programs or Trowel Trades operations.

1. Is there risk sharing among individual participants?

Yes. Trowel Trades' financial success and its ability to return profits to participants depend on its participants beating loss expectations as a group.

2. What is the exposure for a participant?

The maximum exposure to loss for a participant is its premium plus its surplus contribution, if any.

3. Why take the risk?

Trowel Trades offers the potential for insurance cost savings through shared profits resulting from positive loss performance and investment income. Many participants would not be financially able to access these potential profits on a stand-alone basis.

4. How is the captive protected from catastrophic loss?

Trowel Trades is only responsible for the first $250,000 of each and every claim. ULLICO Casualty will retain any amounts paid above this ceiling and amounts above a certain volume of claims paid by Trowel Trades in a year.

5. Will Trowel Trades be protected by Reinsurance?

While Trowel Trades will not purchase true reinsurance, it will not be responsible for portions of claims above $250,000, or for total claims payments above 85% of premium paid to it. Losses above these amounts will be paid by ULLICO Casualty.

1. How is pricing determined?

Each contractor will be individually underwritten and priced according to underwriting guidelines developed by ULLICO Casualty. Considerations include both quantitative measures (e.g., loss experience, state exposure) as well as qualitative measures (i.e., risk management programs, safety programs, loss controls, management, etc.).

2. Will I receive rates that reflect different types of work performed (i.e., Tile versus PCC)?

Yes. Where there are separate class codes that reflect different job classifications, the policy will reflect those class codes and corresponding rates.

3. How will this work for a contractor that works in many states?

Contractors with multi-state exposure will receive a multi-state policy using State National's or ULLICO Casualty's filed rates.

4. What happens if I'm located in a state where workers' compensation rates are established by the state?

If a state mandates rates, State National and ULLICO Casualty will use the same rates as other carriers. However, participants of Trowel Trades will be eligible to share in profits of Trowel Trades. If a state mandates rates, there is even less price differentiation between those employers with sound risk management programs and those without. The captive provides a way for participants to be rewarded for positive loss experience and the energy they put into risk management and safety programs.

5. What are the costs associated with this program? Will I contribute capital to the captive (that is "skin in the game") ?

• Premium, and
• For participants with estimated first year's annual premium of $25,000 or more, surplus contribution that is equal to 25% of premium, payable over the first three years at 9%, 8% and 8%, each year respectively.

6. Will General Liability and other insurance products be covered?

Workers' compensation insurance is the only product currently offered through the Trowel Trades captive, but ULLICO Casualty can offer contractors access to general liability and other insurance products not currently offered through Trowel Trades. If a contractor purchases its workers' compensation and general liability insurance and/or other products together, ULLICO Casualty will work with the contractor to place this coverage if they switch to Trowel Trades for workers' compensation.

7. What is the potential savings for contractors under Trowel Trades?

Profits, when earned by the captive, can be returned to participants. The amount to be returned will vary from year to year depending on results, and will be determined by the Trowel Trades Board of Directors.

1. What are the submission requirements?

• Fully completed Accord 130 Workers' Compensation Application
• Currently Valued Loss Runs - current year and prior (2) years (5 years if available)
• Experience Modification Worksheet (if available)
• Detailed description of any claim with an incurred amount of $20,000 or higher
• Application should include full detailed description of all operations performed by the applicant
• Loss Control Report (if available)
• Payroll Information - total payroll by policy year for current and prior (2) years (5 years if available)
• Premium Information - total premium for current and prior (2) years (5 years if available)
• Supplemental Application
• Inspection Report (if available)

2. What are the underwriting guidelines?

ULLICO Casualty underwrites the signatory contractor the same as a standard market submission and then selects the best in class applicants from a historical loss performance, financial strength and loss control perspective.

3. How does the program avoid adverse selection?

Each account is underwritten using claims history with the premium and experience of each participant. Captive participants with higher premium which could result from higher losses, will contribute more surplus.

4. Our company has the lowest loss ratios in our industry. Why should I join a group that does not universally have similar experience?

With traditional insurance, your company will continue to pay premium without any possibility of a return of profits recognizing your outstanding loss experience. Trowel Trades offers you the opportunity to lower insurance costs, and realize potential profits based on that positive loss experience.

Not every contractor is allowed into this program. We select participants based on underwriting criteria including, but not limited to, their historical loss performance, financial strength, and loss control procedures. As a participant in the Trowel Trades captive your company would be part of a "Best in Class" group.

1. What is contributed surplus?

Contributed surplus is the capital investment some participants will make into Trowel Trades. Like other forms of capital, surplus is necessary to support Trowel Trades in the event of negative performance.

2. What do I get for my contributed surplus?

Your participation in Trowel Trades offers the opportunity to share in profits.

3. How do I post required surplus?

For participants with estimated first year's premium of $25,000 or more, surplus must be contributed in cash over the first three years of membership. Others may elect to contribute surplus.

1. When will we know whether Trowel Trades has been profitable?

Initial indications of underwriting results for a given year are available within twelve months of the expiration date of the last policy written in the calendar year.

2. How will I know the results of the program?

Annually you will receive a financial statement for Trowel Trades. Distributions of profits made to participants will be announced by the Trowel Trades Board of Directors.

3. Are surplus funds invested?

Yes. Surplus and premiums are invested with the objective to earn a market rate of return consistent with principal preservation and having cash available to pay claims.

1. What documentation is required to participate in Trowel Trades?

2. What is a Membership Agreement?

The Membership Agreement governs the contractual relationship between the signatory contractor and Trowel Trades. You will be provided with substantial additional information regarding Trowel Trades- including a copy of the Membership Agreement- and have an opportunity to ask questions before you are asked to sign the Membership Agreement.