Our co-founder Karin Landry, was listed in Captive International’s Most Influential Women in Captive Insurance, which highlights leading female figures in captive insurance and alternative risk financing. You can find the full list here.

In a recent interview on captive.com, our VP, TJ Scherer speaks about key insights when it comes to creating a captive and how it can impact renewal cycles and stakeholder preferences. You can find the fill interview here.

Obesity is not a choice or a moral failing. It is a chronic, multifactorial disease with metabolic, behavioral, psychological, and environmental underpinnings. As employers, benefits managers, and health plan stewards, you must ask: Do you have all the pieces you need to manage obesity effectively? Offering a single tool will rarely suffice.

What Is a Weight Management & Metabolic Health Program?

A weight management and metabolic health program is a coordinated intervention set designed to address obesity and its underlying metabolic irregularities over time. These programs typically combine:

• Clinical evaluation of metabolic markers (for example, insulin resistance, lipid profiles, inflammation) ¹
• Nutritional counseling customized to metabolic needs
• Frequent and ongoing monitoring, follow-up, and adjustment
• Behavior change support, including coaching and psychological or mental health resources
• Physical activity and exercise guidance to preserve muscle and improve metabolism
• Medication support when clinically appropriate (including GLP-1 or including obesity GLP-1 agonists and other weight loss agents) ³

A high-performing program does not treat obesity simply as excess weight. Instead, it views obesity as a chronic disease that requires continuous management and adaptation.

Direct Primary Care

Obesity affects more than 40 percent of U.S. adults and is a major contributor to type 2 diabetes, cardiovascular disease, nonalcoholic fatty liver disease, certain cancers, osteoarthritis, and sleep apnea¹. Recognizing obesity as a disease rather than a behavioral failure shifts the paradigm. It demands a coordinated multi-pronged strategy, not a simplistic “eat less, move more” approach.

The causes of obesity are complex. Genetic predisposition, hormonal dysregulation, gut microbiota, psychosocial stressors, sleep disruption, food environment, and socioeconomic factors all play roles². Because of this complexity, no single solution such as a pill or injection can resolve the disease in isolation.

GLP-1 medications such as semaglutide and tirzepatide have demonstrated promising results in clinical trials for weight loss and improvements in metabolic health markers³. However, real-world adoption, drug discontinuation, and weight regain remain significant challenges. One analysis found that more than 50 percent of patients using GLP-1s for weight management stopped treatment within 12 months³. After discontinuation, biological adaptations lead many to regain much of the lost weight within a year. These patterns underscore that GLP-1s are powerful but only one piece of a broader strategy.

The Cost and Employer Dilemma

Employers contemplating coverage for GLP-1s face a difficult tradeoff. On one hand, these medications are expensive and can significantly increase pharmacy spending. A recent survey indicated employers are rethinking their strategy and many employers covering these medications today are considering a change. High discontinuation rates and uncertain long-term value make ROI calculations complex.

On the other hand, effective obesity management and improved metabolic health can reduce downstream costs associated with diabetes, cardiovascular disease, joint issues, and productivity loss⁴. Employers must decide whether to cover GLP-1s, and if they do not, how else to invest in comprehensive wellness and chronic condition management programs.

Benefits to Patients and Providers

For Patients

• Improved metabolic outcomes, including better insulin sensitivity and blood pressure
• Sustainable weight loss when combined with behavioral interventions
• Reduced risk of obesity-related comorbidities
• Enhanced quality of life, mobility, and mental well-being
• Lower likelihood of requiring invasive procedures such as bariatric surgery

Programs that integrate behavioral and psychological support help patients address emotional eating, stress, and motivation, which are often critical to long-term success.

For Providers

• Structured care pathways for chronic obesity management
• Data and feedback loops that allow for continuous monitoring and early intervention
• Clearer alignment with evidence-based best practices
• More efficient coordination between primary care, nutritionists, and behavioral specialists

Providers participating in holistic programs are better positioned to support patients in achieving sustainable outcomes rather than focusing solely on short-term weight loss².

Key Questions for Your Point Solution

When evaluating or designing a weight management and metabolic health program, consider the following questions:

1. Does the program address underlying metabolic dysfunction rather than just weight loss?
2. Are healthy behaviors supported over time, not only during initial engagement?
3. Is psychological or behavioral support part of the design?
4. If medications such as GLP-1s are offered, are they integrated within a structured clinical framework?
5. Does the program emphasize preservation of lean muscle mass through physical activity and nutrition?
6. Is there flexibility to adapt the program as patient needs and results evolve?
7. Do providers have sufficient training and resources to sustain engagement?
8. Is there a clear cost-benefit analysis and a defined measurement strategy for ROI?

Takeaways & Recommendations

Effectively addressing obesity requires viewing it through the same lens as other chronic diseases, with a long-term management strategy rather than a quick fix. Employers, providers, and health plan leaders must recognize that no single intervention can succeed in isolation. A comprehensive weight management and metabolic health approach combines medical treatment, behavioral support, nutrition, and ongoing engagement. While GLP-1 therapies have shown promise, they are only one component of a multifaceted solution. Without lifestyle changes and behavioral health integration, the long-term success of these medications is limited. Employers evaluating whether to cover GLP-1s should consider both the financial implications and the broader care framework necessary for success. Those that do offer coverage can maximize outcomes by ensuring these medications are paired with coaching, nutritional counseling, and continued follow-up. For those unable to include them, investing in alternative wellness initiatives and chronic condition management programs can still demonstrate support for employee health. Ultimately, effective obesity management depends on aligning all available tools (clinical, behavioral, educational, and organizational) to create a system that promotes sustainable metabolic health over time⁵.

¹FAIR Health. (2024). Obesity and GLP-1 Drugs: A FAIR Health White Paper. Retrieved from https://s3.amazonaws.com/media2.fairhealth.org/whitepaper/asset/Obesity%20and%20GLP-1%20Drugs%20-%20A%20FAIR%20Health%20White%20Paper.pdf
²McKinsey Health Institute. (2025). The Path Toward a Metabolic Health Revolution. Retrieved from https://www.mckinsey.com/mhi/our-insights/the-path-toward-a-metabolic-health-revolution
³American Journal of Clinical Nutrition. (2025). GLP-1 Clinical Trial Findings. Retrieved from https://ajcn.nutrition.org/article/S0002-9165%2825%2900240-0/fulltext
⁴Cigna/Evernorth. (2024). Employer Strategies for Sustainable GLP-1 Coverage. Retrieved from https://newsroom.cigna.com/employer-strategies-for-sustainable-glp1-coverage
⁵Luminare Health. (2025). GLP-1s and the Cost of Obesity. Retrieved from https://www.luminarehealth.com/site/media/Files/LH-3270-White-Paper_GLP-1s.pdf

High-cost claims, and the claimants incurring those expenses, are arguably the biggest cost pressure self-insured employers face within the healthcare ecosystem. Solutions are complicated, multi-faceted, and ideally implemented before a claim occurs. Although these solutions only impact a small percentage of the population, their overall effect is significant, and once established, the savings compound.

Employers should begin by defining high-cost claims for their organization and verifying the clinical drivers. From there, solutions can be considered that will directly impact current claims and future cost mitigation.

Defining High-Cost Claimants

The definition of high-cost claims is not uniform. Many employers use a targeted dollar threshold (for example, $100,000) to pinpoint high-cost claims, which are embedded in the insurance model through stop-loss contracts. While that benchmark makes reporting consistent, it is often more practical to consider plan size and risk tolerance when defining high-cost claims.

The National Alliance of Healthcare Purchaser Coalitions (2024), of which our client edHEALTH is a member, estimated that 1.2% of health plan members are high-cost claimants, making up approximately 33% of total healthcare spend. These individuals absorb 29 times the average member cost, with an average of $122,382 per claimant. By stratifying data, employers can start to pinpoint which individuals are high-cost claimants now, and who may become one in the future, and implement solutions to mitigate spend.

Clinical Drivers

When examining data across our book of business at Alera Group, oncology and specialty pharmacy conditions, such as rare diseases, are the top diagnoses associated with high-cost claims. Other common drivers are cardiovascular disease, newborn and infant care, and musculoskeletal disorders.

According to Sun Life’s 13th Annual High-Cost Claims and Injectable Drugs Trend Analysis (2024), cancer again tops the list as the most frequent and costly condition, nearly three times the cost of the second-leading condition, cardiovascular disease.

Employers should start by analyzing their own data and focusing on where they can make the most impact. Industry data, assuming the sample is broad, can serve as a helpful benchmark when developing a strategy, but understanding internal data is critical to success. In nearly all cases, specialty care is where savings will be found, and following the path of comorbidities often leads to the best outcomes. In addition, employers should implement broad market shifts and tactical actions that work together to address current costs and reshape future spending.

Cost Saving Through Broad Market Shifts

Self-insured employers seeking opportunities for savings related to high-cost conditions, claims, and claimants should consider the following broad shifts in thinking:

• Ownership of Plan Governance:
  Self-insured employers govern their plans but often do not build an internal structure, instead relying on vendor partners. Employers looking to target innovative solutions should maintain ownership of plan rules and understand the flexibility of their partners.
• Oversight of Steerage and Utilization Management:
  Plan management is complex, and vendor partners frequently revise rules related to steerage, utilization review, and care management. Understanding where flexibility exists allows employers to manage emerging therapies and carve-outs in the best interest of the plan.
• Value-Based Specialty Arrangements:
  Value-based arrangements create aligned goals and greater transparency, though they are less common in specialty care. Contract language should be carefully reviewed.
• Specialty Medication Solutions:
  Employers and their vendor partners must begin having detailed conversations about specialty medications, especially as the pipeline for these treatments expands beyond rare diseases.
• Partnering with Aligned Vendors:
  Some vendor partners may not have goals that align with employers. Those serious about managing high-cost claims should find partners willing to focus on value-based care, centers of excellence, and network management.
• Data and Analytics:
  Understanding plan data is a fundamental requirement for managing high-cost claims. It starts with utilization and baseline information but must extend to member-level analysis and predictive reviews that consider demographics and comorbidities. The goal is to establish protocols before claims are incurred so they can be proactively managed.

Tactical Actions Targeting High-Cost Claimants

At a tactical level, employers must be focused on opportunities that deliver savings at the condition level and continuously monitor results. This can be done with a partner, but if incentives are not aligned, methodology and key performance indicators should be established in advance.

Key first steps often include:

• Stop-loss design
• Prior authorization for top cost drivers
• Vendor contracting
• Centers of excellence
• Disease-state initiatives focused on prevention, care navigation, and overall management (for example, oncology, infusion site of care, cardiology, prenatal/neonatal, behavioral health, musculoskeletal, and others)

High-cost claims will continue to be a defining challenge for self-insured employers in higher education and beyond. Addressing them effectively requires a balanced approach that combines strong governance, meaningful data analysis, and proactive partnership with vendors and providers. Employers who invest the time to understand their data and align their strategies accordingly are best positioned to control costs while improving outcomes for their members. The goal is not only to manage high-cost claims when they arise but to build a framework that anticipates and prevents them wherever possible.

Sources:
National Alliance of Healthcare Purchaser Coalitions. High-Cost Claims Report, 2024.
Sun Life. 13th Annual High-Cost Claims and Injectable Drugs Trend Analysis, 2024.
Kaiser Family Foundation. Employer Health Benefits Survey, 2024.

Primary care providers—originally general practitioners who would later specialize into modern internal and family medicine physicians—served as lone practitioners for much of the 20th century, playing a central role in both the healthcare system and their local communities.¹ After World War II, the prominence of PCPs declined as specialty care expanded, influenced by changes in medical education, reimbursement models, technology, and public demand². Today, rising healthcare costs, workforce shortages, and systemic pressures have highlighted underinvestment in primary care. The market is seeking solutions that remove barriers, enhance education, and support population health management³.

Shifts in Primary Care

Primary care remains a core component of all health plans, but fee structures and market pressures have changed the patient–provider relationship. Patients often face rushed appointments, long wait times, low reimbursement rates, and high administrative burdens. These factors contribute to burnout among PCPs and have led the Association of American Medical Colleges (AAMC) to project a shortage of 17,800 to 48,000 primary care physicians by 2034⁴. Insurance requirements, market consolidation, and operational pressures limit PCPs’ ability to deliver optimal care. Patients are also demanding broader access, digital solutions, self-service options, and hybrid care models. In response to these growing challenges, Spring Consulting Group’s client edHEALTH, a captive health coalition serving educational institutions, is proactively pursuing primary care solutions to meet the evolving needs of its member schools. Direct primary care (DPC) has emerged as a strategic tool for employers seeking to improve access, enhance preventive care, reduce avoidable acute care utilization, and generate a return on investment⁵.

Direct Primary Care

At the core, direct primary care provides patients with unlimited access to a primary care team for a flat monthly fee, typically outside of traditional health plan coverage. Most DPC solutions guarantee same-day or next-day appointments, longer visit times, higher patient satisfaction, and bundled care for preventive, chronic, and acute conditions⁶.

DPC models vary depending on vendor capabilities and employer priorities. Options include onsite or near-site clinics, virtual-first networks, retail clinics, preferred-access arrangements, navigation and concierge support, digital tools such as AI and wearables, incentives for engagement, and plan design levers to drive utilization. Providers include retail brands, technology-driven platforms, and employer-focused businesses leveraging onsite, near-site, and virtual-first care models.

DPC emphasizes relationship development and improved access rather than gatekeeping. It positions primary care as a strategic entry point, controlling downstream utilization, referrals, and chronic disease management. Separating primary care from traditional insurance networks may allow patients to access the best available care, facilities, and providers. DPC models can also incorporate risk-based approaches, including capitation or partial-risk arrangements.

Patients increasingly expect convenience, engagement, and integrated behavioral health. DPC partners are responding with retail-style access, care navigation, and satisfaction-focused services. Employers can align DPC partnerships with broader human resources initiatives, such as curated networks, direct contracting, and programs addressing social determinants of health.

Virtual-First Primary Care

In addition to DPC, other access models such as virtual-first primary care and urgent care clinics are shaping the future of healthcare delivery. Virtual-first primary care models are increasingly being adopted as a complementary approach to in-person care. These models prioritize digital access by encouraging patients to connect with their care team through telehealth visits, chat, or app-based platforms before turning to in-person appointments. Virtual-first care can improve access, reduce wait times, and support patient engagement, particularly for populations who may struggle with transportation or scheduling barriers.

When integrated effectively, virtual-first models can serve as a gateway to coordinated care by addressing routine concerns, managing chronic conditions, and promoting preventive health measures. However, challenges such as continuity of care, patient trust, and integration with existing electronic health records must be carefully managed to ensure quality outcomes. For employers, virtual-first networks can complement direct primary care by expanding access and helping to balance costs without sacrificing patient experience.

Market Shifts and Employer Considerations

Employers, particularly self-funded ones, must increasingly shape their healthcare strategy to maximize value. Primary care represents a relatively small portion of overall healthcare spend, and immediate savings may be limited. However, long-term investment in DPC can yield measurable benefits over three to five years. Successful DPC implementation requires attention to challenges such as geographic coverage gaps, referral coordination limitations, regulatory uncertainty, and member education. Employers should prioritize integration with existing health plan solutions, coordinate utilization and data tracking to ensure savings are captured accurately and deploy clear communication and engagement strategies.

When implemented effectively, DPC models shift the healthcare narrative toward value-based care, improve access, strengthen care coordination, and enhance patient satisfaction, ultimately supporting both employee health and organizational objectives.

¹Starfield, B., Shi, L., & Macinko, J. (2005). Contribution of primary care to health systems and health. The Milbank Quarterly, 83(3), 457–502.
²Bodenheimer, T., & Pham, H. H. (2010). Primary care: Current problems and proposed solutions. Health Affairs, 29(5), 799–805.
³Petterson, S., Liaw, W. R., Tran, C., & Bazemore, A. W. (2015). Estimating the residency expansion required to avoid projected primary care physician shortages. Annals of Family Medicine, 13(2), 107–114.
⁴Association of American Medical Colleges. (2023). The complexities of physician supply and demand: Projections from 2023 to 2034.
⁵Rosenthal, T. C. (2012). The medical home: Growing evidence to support a new approach to primary care. JAMA, 308(21), 2335–2336.
⁶Direct Primary Care Coalition. (2022). What is direct primary care? Retrieved from https://www.dpcare.org/

The political landscape has seen significant developments in healthcare reform, notably with the enactment of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025¹. This legislation introduces changes that may reshape healthcare policies, employee benefits, and overall benefits packages. Understanding these changes is crucial for employers to navigate the evolving landscape effectively¹,².

What Is the “Big Beautiful Bill”?

The “Big Beautiful Bill,” officially known as the One Big Beautiful Bill Act, is a substantial piece of legislation encompassing tax, spending, and healthcare provisions¹,³. The law focuses on deregulation of healthcare, expansion of private insurance options, tax incentives for both employers and employees, and modifications to certain provisions of the Affordable Care Act (ACA)¹,⁴. At its core, the law aims to increase competition and choice in healthcare, with the objective of reducing premiums and expanding access³.

How Will the Bill Impact Employee Benefits?

Changes to ACA Compliance

The OBBBA includes provisions that modify certain aspects of the ACA²,³. While the law does not eliminate the ACA, it introduces changes, such as new reporting requirements for certain Medicaid enrollees and restrictions on federal financial assistance for those enrolled in the ACA Marketplace². Employers offering health insurance may encounter fewer regulatory requirements around employee health plans but could face challenges if employees opt out of company-sponsored coverage due to more affordable individual insurance options or if employees lose government-sponsored coverage³.

Expansion of Health Savings Accounts (HSAs)

The law expands Health Savings Accounts (HSAs) by broadening the definition of a high-deductible health plan (HDHP) to include bronze and catastrophic plans²,³. This allows taxpayers to save and invest more money tax-free for healthcare expenses². For employers, these expanded accounts present an opportunity to provide more customizable healthcare benefits, potentially reducing administrative costs while empowering employees to manage healthcare expenses more effectively³. The OBBBA also designates Direct Primary Care arrangements as qualified medical expenses eligible for HSA coverage within limits².

Shift Toward Private Insurance

The legislation includes adjustments to Medicaid and changes to the ACA marketplace, which may result in fewer individuals relying on government-run plans²,³. This shift encourages employers to refine benefit packages to provide more personalized private insurance options that better align with employee needs³. Increased competition among private insurers may also influence employer-sponsored insurance premiums².

Tax Incentives for Employers

The OBBBA introduces new tax provisions, including a permanent increase to the standard deduction¹,². While healthcare-specific tax incentives for employers are not as clearly detailed as individual tax changes, the general focus on tax relief and cost reduction is intended to encourage companies to reassess benefit offerings and consider new ways to support employee health and well-being².

Potential Impact on Wellness Programs

The law’s emphasis on individual choice and competition may encourage employers to invest more in wellness programs²,³. Health and wellness incentives, such as gym memberships, mental health services, and preventative care, could become more prevalent as employers aim to improve employee health outcomes and reduce long-term healthcare costs³. These programs can also enhance employee engagement and satisfaction².

What Can Employers Do to Prepare?

Given the significant changes brought by the OBBBA, employers should remain informed and proactive. Key strategies include:

1. Stay Updated on Legislation:
   Employers should regularly monitor updates on the law, particularly regarding ACA regulations, HSA contributions, and tax incentives²,³. Joining professional organizations or subscribing to policy newsletters can help employers stay current.
2. Review Employee Benefits Packages:
   Employers should evaluate current healthcare offerings and consider adjustments to remain competitive and cost-effective, particularly with expanded HSAs and private insurance options²,³. Supplemental private plans or partnerships with brokers may help diversify options for employees².
3. Communicate with Employees:
   Transparent communication is essential. Employers should educate employees on changes to benefits, HSAs, and wellness programs, and explain potential impacts on premiums or out-of-pocket costs²,³.
4. Consult with Benefits Advisors and Legal Counsel:
   Navigating healthcare reform is complex. Consulting advisors and legal counsel ensures compliance and appropriate plan design under the new law²,³.
5. Prepare for Tax Adjustments:
   Employers should reassess benefits strategies to maximize available tax incentives, adjust structures as necessary, and ensure overall compensation remains competitive¹,².

The Road Ahead for Employers

The One Big Beautiful Bill Act has introduced substantial transformations to the healthcare landscape¹,². Its impact on employee benefits is becoming clearer as provisions are implemented. Healthcare is likely to become more individualized, with greater responsibility falling on employers to navigate benefits packages effectively²,³. By staying informed, reassessing offerings, and planning proactively, employers can adapt to the evolving regulatory environment while continuing to support employee health and well-being²,³.

¹Congress.gov. (2025). H.R.1 – One Big Beautiful Bill Act 119th Congress (2025-2026). https://www.congress.gov/bill/119th-congress/house-bill/1
²Ballard Spahr. (2025, July 14). The OBBBA’s impact on employee benefits and executive compensation. https://www.ballardspahr.com/insights/alerts-and-articles/2025/07/the-obbbas-impact-on-employee-benefits-and-executive-compensation
³McDermott Will & Emery. (2025, July 7). Employee benefits provisions of the One Big Beautiful Bill Act. https://vitacompanies.com/blog/employee-benefits-provisions-of-the-one-big-beautiful-bill-act
⁴Johns Hopkins Bloomberg School of Public Health. (2025, July 30). The changes coming to the ACA, Medicaid, and Medicare. https://publichealth.jhu.edu/2025/the-changes-coming-to-the-aca-medicaid-and-medicare

In a recent article from captive.com, our Vice President, TJ shares his perspective on how captive insurance programs can be leveraged to reinsure surety bonds, offering new avenues for capital efficiency and enhanced risk management. You can find the full article here.

Collateral requirements can come as a confusing surprise for insureds with large deductible programs or captives with fronted arrangements. In this article, we’ll answer some of the most common questions around when collateral is needed, how carriers determine these requirements, and how an independent actuarial analysis can provide clarity and, in some cases, reduce the collateral burden.

When Is Collateral Required?

Insurance carriers are in the business of assuming risk in exchange for a premium. So why would they require collateral on top of that? The answer lies in scenarios where the carrier takes on credit risk. This happens in two common situations:

1. Large Deductible Programs:
   In a large deductible arrangement, the insured is responsible for the first layer of payment in any given claim. This exposes the carrier to the risk that the insured may be unable to pay, due to insolvency or other financial issues. Since this credit risk is not covered in the premium, collateral (e.g., letters of credit, cash, or trust funds) is required to secure future reimbursements.
2. Captive Fronting Arrangements:
   In a fronted captive structure, a commercial insurer (the “fronting” carrier) issues the policy to the insured and cedes all or a portion of the risk to the captive via reinsurance. If the captive cannot fulfill its obligations (e.g., it becomes insolvent), the fronting carrier remains liable for claim payments. To mitigate this credit risk, the carrier requires collateral from the captive based on the expected liabilities it is ceding.

It is important to note collateral goes to support the ceding insurer’s Schedule F requirements in the U.S. statutory accounting framework.  Schedule F requires collateral for unauthorized reinsurers or increased risk based capital charges.

How Do Carriers Set Collateral Requirements?

Collateral requirements are typically based on the estimated unpaid losses retained by the insured or a captive, whether through a large deductible or a captive reinsurance agreement. The process typically includes the following steps:

1. Estimation of Ultimate Losses:
   For each policy year, the carrier first estimates “ultimate” retained losses and loss expenses for the insured or captive using actuarial methods. These ultimate losses include the following three claim components:
   • Paid losses (claim payment on closed and open claims)
   • Case reserves (reserves set typically by claims administrators for known open claims)
   • IBNR (incurred but not reported claims, including late-reported and under-reserved claims)
2. Calculation of Unpaid Losses:
   Unpaid losses = Ultimate losses – Paid losses
   This amount includes case reserves and IBNR.
3. Adjustments Based on Financial Strength and Other Factors:
   Carriers may reduce required collateral depending on the insured’s financial standing, claims-paying history, or other negotiated factors, such as expected payments over the next policy period.

Depending on the carrier’s risk appetite and underwriting philosophy, they may require collateral above and beyond the actuarial estimate of unpaid claim liabilities. For fronting arrangements, the ceding company often considers the limits of the reinsurance contract with the collateral requirement to satisfy their reporting requirements. Additionally, since many captives are not rated, their financial strength cannot be considered as much as the insured with a large deductible plan. As a result, a fronting carrier’s required collateral is often greater than collateral for a large deductible program at a similar retention. This variability makes it critical for insureds to understand and, when appropriate, challenge the assumptions behind collateral determinations.

Another important issue to understand with collateral obligations is the staking of policy year collateral particularly with long tailed lines. With each additional policy year of exposure collateral will grow as the reserve need grows to payout unpaid claim liabilities. This is driven by factors such as the payment pattern, exposure size, and trend but may be offset by claims from older years settling and closing out. This is illustrated in the next section.

Explanation of why IBNR and Reserve Development Assumptions So Important

The inclusion of IBNR in the calculation of unpaid liabilities for the retained losses of the insured or captive ensures that liabilities are not understated, especially for more recent policy years that are still developing. Without IBNR, estimates would only reflect known and reported claims, missing the potential for future loss emergence. Actuarial assumptions, such as loss development factors and trends, play a large role in determining the size of IBNR and thus the total collateral needed related to each policy year.

Graphical models (as seen in other collateral guidance) often illustrate that unpaid losses increase over the first few policy years with a carrier, then flatten out as payments catch up and fewer legacy claims remain. However, any increase in deductible levels or rapid expansion in exposure can restart the “ramp-up” of collateral needed. This is illustrated in the following graphic between 2019 and 2020 with a doubling in company size. Also illustrated is the stacking of collateral for a long-tailed line like workers’ compensation. At each policy year renewal historical reserves decrease as claims are paid and closed but prospective policy year exposure is added.

How Can an Independent Actuarial Review Help?

Collateral is often based on the carrier’s actuarial projections, but these projections vary widely depending on the methodology, assumptions, and data quality. An independent actuarial review offers the following benefits:

• Transparency: Clarifies what’s driving collateral changes year-over-year.
• Validation or Challenge: May identify overly conservative assumptions (e.g., inflated loss development factors).
• Negotiation Support: Offers third-party credibility in discussions with carriers.
• Strategic Insight: Helps explore alternate program structures that may reduce or eliminate collateral needs altogether.

Here are two real-world examples of how an independent analysis made a difference:

Case Study 1: Workers’ Compensation Collateral Reduction

A Florida-based employer approached us with concerns over their self-insured workers’ compensation collateral. Their existing independent actuary had supported a collateral requirement of approximately $1M. Upon review, we found the prior analysis used conservative loss development factors inconsistent with actual experience. Our revised projections reduced the necessary collateral to under $400K, a 60% reduction, without compromising conservatism or adequacy.

Case Study 2: Auto Liability & Workers’ Compensation Program

A private equity-backed client with a multi-state deductible program was facing significant collateral hikes from their carrier. Our team conducted an independent review and found that the carrier’s actuaries used industry-standard payment patterns, which were misaligned with our client’s much faster claims payment history. By recalibrating the payment patterns and addressing a few minor methodology concerns in a call with the carrier’s actuaries, the client’s collateral requirement was reduced by over $1 million.

When a Collateral Requirement Is Justified

Not every independent analysis leads to a reduction. In some cases, we’ve found the carrier’s requirement to be reasonable or even favorable based on the insured’s data. Factors such as competitive pressure, strong credit ratings, or favorable development may contribute to a conservative collateral stance. Even then, an independent report helps the insured understand the process and strengthens their position in negotiations.

Alternative Program Structures to Avoid Collateral

An actuarial analysis can also inform a longer-term strategy. For example:

• Switching from Large Deductible to Self-Insured Retention (SIR):
  In an SIR structure, the insured pays claims directly up to the retention, which eliminates the carrier reimbursement risk and often reduces or eliminates the need for collateral.  While a SIR may reduce collateral, it could have other tradeoffs and is not always an option for all lines of coverage
• Utilizing a Captive to Post Collateral:
  In some cases, an insured’s captive can post the collateral instead of the parent company even if the captive is not fronted. This makes use of surplus or other captive assets to secure the required amount.  Not all domiciles allow unrestricted use of captive surplus as collateral.

These strategies must be evaluated with regulatory, financial, and operational considerations in mind, but they are worth exploring for insureds facing increasing collateral burdens.

Collateral requirements are a critical but often misunderstood part of large deductible and captive insurance programs. Independent actuarial analysis not only sheds light on how those requirements are set but also equips insureds with the tools to question assumptions, potentially reduce collateral, and explore smarter program structures. Whether validating the carrier’s position or uncovering opportunities to save, actuarial expertise can be a powerful asset in navigating the complexities of collateral.

Title:

Actuarial Consultant

Joined Spring:

February 2021

Hometown:

Burlington Vermont has been my home for the last 10 years, but I grew up in Allentown, PA and Mountainside, NJ before that

At Work Responsibilities:

Prepare and review actuarial reports for reserving, pricing, and Statements of Actuarial Opinion for insurance or captive insurance company clients.  Prepare and present loss estimates and financial forecast for clients’ prospective captive formations. Work with clients to source data inputs as well as present findings and discuss impacts.

Outside of Work Hobbies/Interests:

I like getting active outdoors running or biking on trails nearby or visiting the beaches here in town.

Fun Fact:

I go through phases where I cook a lot. I learned a good pizza dough in Spring 2025 and have made approximately 50 pizzas since.

Describe Spring in 3 Words:

Collaboration, flexibility, and excellence

Do You Have Any Children?

Yes, my son Bruce (13)

Favorite Food:

Coffee, pizza, lo-mein, ribs, wings, donuts, celery, raspberries

Favorite Place Visited:

Montreal during the summer