Medical Professional Liability and Captives

Medical professional liability insurance is essential for protecting the career and prosperity of health care providers.  In the face of rising insurance premiums and inadequate commercial coverage that can leave a physician or practice vulnerable, a captive insurance company could provide the protection that a professional needs.  A captive is an insurance company formed by a business owner to cover the insurance risks of the business.  A captive can customize insurance to meet a doctor’s specific needs, while providing the doctor with another source of revenue.  Some of our clients, who have formed a captive, combine coverage through their captive with traditional insurance purchased from a commercial carrier.  However, many clients have abandoned the commercial market entirely and use their captive for all of their insurance needs.

A medical practice forming a captive should consider reinsurance.  Reinsurance is insurance for an insurance company.  It enables the captive to take on greater risk by sharing some of that risk with another insurance company. It protects a captive in the event of a catastrophic claim and ensures that the captive will have the ability to pay claims.  RMC Group has access to the reinsurance market and can help a captive find the right reinsurance partner.

While the primary purpose of a captive is to cover the insurance risks of its associated business, it can also serve as an additional revenue center for its owner.  To the extent that premiums paid to an insurance company exceed claims, the insurance company earns a profit.  If those premiums are paid to a commercial insurance company, the doctor shares in none of that profit.  However, if a medical practice pays premiums to its captive, and the premiums paid to the captive exceed claims, the captive retains the profit, and, eventually, whether by payment of taxable dividends or distributions upon dissolution, those profits will be paid to the physician-owner.

RMC Group will work with our stable of reinsurers to prepare a preliminary quote for your reinsurance. The quote is based on such factors as your appetite for risk, desired retention level and form of coverage.

RMC Group will work to find you the best possible reinsurance arrangement. In order to begin the process, we simply need a good understanding of your practice and any loss history that you can provide. A reinsurance company will need to see the following information:

  • Business plan
  • List of insureds including premium, specialty, state, retro dates and policy limits
  • Latest actuarial report
  • Claims management protocols
  • Loss runs
  • Original policy forms
  • Financial statements

To learn more about our reinsurance offerings or to get a quote, contact RMC Group at 239.298.8210 or [email protected].