Program Overview
The Trowel Trades Industry Insurance Company ("Trowel Trades" or the "Captive") is a participant-owned mutual captive insurance company providing workers' compensation coverage to qualified masonry-trowel trades contractors. The International Union of Bricklayers and Allied Craftworkers ("BAC") formed Trowel Trades so that BAC signatory contractors can have a means of benefiting from the training and safe work practices of their Union employees. Trowel Trades combines a captive insurance company, an "A" rated policy issuing carrier, and BAC signatory contractors to form a comprehensive insurance program.
Trowel Trades is designed for BAC signatory contractors who are looking for an alternative to expensive and volatile fixed cost insurance programs. The intent was not to create a program for all masonry contractors, but to form a program that will endure and give BAC signatory contractors a competitive advantage in the marketplace. BAC signatory contractors join Trowel Trades for the opportunity to:
- Reduce their insurance costs
- Access high quality service partners
Trowel Trades is a Vermont domiciled mutual captive insurance company owned by BAC and participating BAC signatory contractors it insures. Each contractor who joins Trowel Trades becomes a participant of the Captive. Each participant will have a right to vote on pertinent issues and may receive a share, if any, of the captive's profits. Large participants will contribute surplus to support the Captive's program.
BAC craftworkers receive a level of training unparalleled in the masonry industry. Better-trained employees make your workplace safer, which reduces the frequency, severity and cost of workplace injuries. By reducing accidents, improving loss experience and gaining an opportunity to share in profits, participants may reduce their workers' compensation costs.
Traditional vs. Alternative
The traditional market focuses on complete risk transfer, where an insured pays a premium and the insurance carrier pays all the losses. Insurance carriers provide stability by pooling large amounts of diversified premiums, thereby smoothing out unpredictable losses.
Traditional insurance pools premiums and losses for all employers regardless of their risk management practices, so employers with good results subsidize the costs of employers with bad results. Insurance companies charge an industry rate with little regard to employee training or the safety practices of individual employers.
Consequently, there can be a discrepancy between loss performance and insurance premiums. Employers with strong risk management and safety programs will, over time, subsidize those who don't have such programs, and consequently pay higher premiums than they would otherwise.
A captive is an example of an alternative market solution. Employers join the alternative market because they prefer to have their insurance costs determined by their actual results, not the average industry results. Trowel Trades provides BAC signatory contractors with the opportunity to reduce costs by having an opportunity to share in profits of good group performance.
Trowel Trades Captive Program
Trowel Trades affords BAC signatory contractors the opportunity to exit the traditional insurance pool and join a program with their peers.
Participants will fund for losses through their policy premium. Additionally, some larger participants will provide surplus to Trowel Trades. Each participant will have the opportunity to lower its ultimate cost of insurance through the return of the insurance profits and investment income usually retained by the insurance company. Trowel Trades thereby grants participants the opportunity to reduce their insurance costs when they control losses and provides price stability by relying on a group to support unpredictable claims.
To join Trowel Trades, each participant will:
- Send an insurance submission to the program manager
- Purchase a workers' compensation insurance policy
- Execute the Captive Membership Agreement
- Contribute surplus to the Captive, as required
The Insurance Submission
Each contractor, or its insurance agent or broker, will send a complete insurance submission to the insurance program manager, ULLICO Casualty Group Inc. ("ULLICO Casualty Group"). ULLICO Casualty Group is responsible for the marketing, underwriting, policy management and loss control for Trowel Trades. ULLICO Casualty Group will review each submission, and will determine each applicant's qualifications. ULLICO Casualty Group will provide an insurance proposal to qualified contractors.
The Insurance Policy
Each participant will purchase a policy from an insurance carrier, either State National Insurance Company ("State National"), rated "A," or ULLICO Casualty Company, rated "B+." Both ratings are by A.M. Best as of 12/31/08. The policy will be similar to the participant's current workers' compensation policy, and will utilize the insurance carrier's filed rating plans, which vary by state. The insurance policy will pay for all covered workers' compensation losses, just like normal insurance coverage. The Captive, however, will assume from the issuing carrier a portion of its participants' risk, for which it will receive a portion of the premium. If losses are better than expected and the Captive makes a profit, its participants will have an opportunity to reduce their insurance costs.
The Membership Agreement
Each participating contractor will execute the Membership Agreement, which outlines:
- Participants' Interests
- A Participant's Surplus Contribution, if any
- Allocation of surplus and profits to Participants
- The Liability of Participants
- Three-Year Minimum Participant Commitment
- Non-Transfer of Participants' Interests
Chartis Insurance Management Services, Inc. ("Chartis"), on behalf of Trowel Trades Industry Insurance Company, will send a Membership Agreement directly to each qualified contractor. Chartis is a Captive Manager, and is responsible for regulatory compliance, legal documentation and executing policy and decisions on behalf of the Captive.
The executed Membership Agreement and surplus contribution will be sent to Trowel Trades Industry Insurance Company in care of Chartis.
Some large participants paying over $25,000 in premium will be required to contribute surplus to Trowel Trades equal to 25% of their first year's annual policy premium, paid in three annual installments. The first surplus contribution installment of 9% of premium will be due prior to binding coverage The second installment equal to 8% of premium is due at the first anniversary. The final installment equal to 8% of premium is due at the second anniversary. Premium is due prior to binding coverage.
Opportunity for Profits
If Trowel Trades realizes profits as a result of its participants' good loss performance, participants will have an opportunity to reduce insurance costs by receiving from Trowel Trades a share of those profits.
Membership Classes
Trowel Trades may have an unlimited number of participants divided into three classes - Class A, Class B and Class C. BAC will be a Class C Participant. Qualified signatory contractors will be either Class A or Class B Participants, with those required to make surplus contributions, or opting to make such contributions, qualifying for Class A. Contractors with smaller premiums not electing to contribute surplus will be Class B Participants and will not be required to provide surplus to the Captive.