Welcome to CampusMBA® LIVE Online Workshop We will begin at 2:00 p.m. EST. Please chat among each other before we start. Thank you for your participation! Self Insurance, Captives and Fronting part of the Commercial insurance LIVE Online Series

22 Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting WELCOME! Faculty: Bernard (“Bernie”) M. Brown, President, Insurance Advisors LLC Helen B. Terry, Associate, Hanover Stone Partners Marco Flores, Director of Risk Management, Equity Office Properties Joseph L. Petrelli, CAS, President and founder of Demotech, Inc. Self Insurance, Captives and Fronting

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 3 About your Faculty Bernie Brown is President of Insurance Advisors LLC, Stamford, CT., America’s leading provider of insurance consulting and outsourcing services to the commercial real estate finance industry. Helen Terry was formerly of AXA/Equitable Group responsible for all insurance management for real estate owned and commercial lending, including serving as President of its wholly owned Vermont captive insurer.... continued

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 4 About your Faculty Marco Flores is Director of Risk Management, Equity Office Properties and, formerly, Global Risk Manager, Jones Lang LaSalle Joe Petrelli, CAS, is President and founder of Demotech, Inc., a financial analysis company based in Columbus, OH.

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 5 About Insurance Advisors LLC INSURANCE ADVISORS LLC – SERVICES (est. 1996) 1.New loan insurance reviews 2.Annual monitoring of borrower insurance (Ask about 1/2hr webinar) 3.“On call” retainer service 4.In-house and web based training 5.Monthly Client Bulletin 6.Audits for insurance compliance 7.Project Consulting – Expert Witness Services For more information contact: Bernie Brown –

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 6 Panelists Helen B. Terry Marco Flores Joe Petrelli

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 7 Outline of Today’s Session 1.Typical lender requirements for deductibles, self insurance and captives 2.Describe types of self insurance, including: - deductibles - formal self insurance - captives, captive ratings and reinsurance of captives - fronted programs - risk retention groups 3.Special types of borrowers - big box stores - seniors and nursing homes 4.Questions and wrap up

88 Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting Poll Question Do your lender (s) insurance requirements allow for self insurance? Yes ____ No ____

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 9 Lender Insurance Requirements Standard Lender Requirements Insurance carriers – “Admitted” versus “non Admitted Insurer ratings – Best A III or better? - S&P/Moodys/Fitch on securitized deals Deductible size - $25,000 pretty standard 5% for flood, EQ and Wind

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 10 Types of Self Insurance Deductibles (simplest form of self insurance) -lender problem with high deductibles SPE? -how policyholders select deductible levels

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 11 Types of Self Insurance, continued Formal Self Insurance Programs -Workers Compensation and Commercial General Liability -Claims handling function -Excess catastrophe insurance

12 Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting Poll Question What is a “captive”? ____ wholly owned insurance company that insures the risk of the parent (s)? ____ someone you have captured for ransom?

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 13 Types of Self Insurance, continued Captive Insurance Companies -define captive insurance companies (single parent and group) -history and development -“rent a captives” -perils insured (property, liability, terrorism, etc.)

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 14 Types of Self Insurance, continued Captive Insurance Companies, con’t -Captive insurer ratings -Reinsurance of captives -Aggregate loss exposure concerns -Additional documentation required to evaluate captive programs

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 15 Types of Self Insurance, continued Fronted Insurance Programs – How They Work -Fronting company is rated -Cash claims account -Limited exposure of fronting company -No way to determine if the program is fronted

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 16 Types of Self Insurance, continued Risk Retention Groups -History – mid 1980’s liability crises -Similar insureds -Liability only – companion property programs -Risk Purchasing Groups – similar but not a separate entity

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 17 Special Types of Borrowers Big Box Stores Heavy use of self insurance -high deductibles -total self insurance -minimum net worth representation Nursing/senior -captives and RRG’s – often rated

Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting 18 Conclusion Questions and Discussion

19 Copyright © 2009 Mortgage Bankers Association Self Insurance, Captives and Fronting Thank You on Behalf of CampusMBA Next Insurance LIVE Online Workshop February 8, 2012 Terrorism Insurance Update For a full list of Commercial Programs, visit