In this episode, Henry and Bruce discuss managing risks in a tough market, with options like risk retention groups offering significant cost savings for struggling businesses, and the importance of tailoring solutions to each client's unique needs.
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[Bruce Silverman] Hello everybody, welcome to another edition of "Managing Risk for Tomorrow, Today" with Henry Laville. He's a Risk Transfer Specialist with Elite Risk. Henry, good to see your face again.
[Henry Laville] Oh, it's good to have my face seen again, happy to be here.
[Bruce Silverman] Looking forward to another great discussion, we're going to talk about emerging solutions. We'll get into that in just a moment, if you want to get in touch with Henry, 225-317-4265, firstname.lastname@example.org. So there you go, Henry - Emerging solutions - we have to take a look at these solutions, because the market is changing oh, so quickly...
[Henry Laville] Absolutely. Absolutely. And I use, I use the term emerging solutions because they're not new, but they are in vogue again. For instance, risk retention groups came about from the risk retention group act of 1980, to address hard market issues prevented businesses from going under. When the market was authored, they were less prevalent, less in vogue, you could say, but now they're becoming more commonplace. I think a big issue there is agency acceptance, and a perception around those around those risk retention groups.
[Henry Laville] Right? Absolutely. Absolutely. A lot of times for these businesses, when they get their renewals last minute, they're getting it day of day prior week prior and they may blame their broker, they may blame their agent, they may be right in that assessment that that can be the case sometimes. But the carriers are all in a race to the bottom to see you can be cheaper. We call it the money game. We don't like the money game and business owners don't either, although they do. They do push it they do perpetuate it. But the carriers want to be the last one to offer a quote. So a lot of times the business owners will tell you as they get their options late with no other options and no time. So it's right we have large check today at this premium finance rate or you're out of business tomorrow your trucks are off the road, your doors are shut whatever the case may be. It is a big problem.
[Bruce Silverman] So 1980, what is old is new again, you're not reinventing the wheel, you're just going back and finding solutions that worked in the past.
[Henry Laville] Well, and they've worked since then, too, but they're they're just really coming more into the meat and potatoes, PMC market for transportation risks. A great example, again, risk potential groups, I had a ready mix concrete operation that we were going to do a layered solution, we're gonna have a low attach unit access, you're gonna allow for risk participations, the insured, get distribution, some are captives, all these great thing. It wasn't a great fit for them at the time, because they were so hard up for cash, that they didn't have the upfront costs available. And they didn't have a couple of good years, get some margin under their belt, and then maybe come back to this, I suggested or a genius, and we we could write access over it. And it was a big win. It didn't do anything for us, per se, but it lowered their premium from $857,000 to $420,000. So it's a really big deal. It's a really big deal, it potentially kept that business's doors open. So I felt fulfilled in that, despite that there wasn't as much of a paycheck in it for us. But for some folks, it's a better fit.
I think producers or insurance agents who are in a hard market environment should consider those risks. If you have a client who's having trouble making their margins having trouble. Just keeping up with the overhead presented by insurance, some of those orgies are a great fit. Now, their financials matter their reinsurance treaties matter. So a lot of these are genes will have a invests a rated reinsurance from large carriers, who are household names, at least in the insurance industry, like AmTrust, that's going to be a very, that they're going to have lower margins. And they're gonna have a lot of the oversight on the main carrier I'm working on right. Now, they may be a little bit high. Not completely different than the normal carriers, but Xand, from going under, you see certain states, Florida, wanting to have all their risk potential groups have an AMS waiting, that's gonna defeat the entire purpose of an AMS group, or potential group, they're gonna have to have fronts and things of that nature, it's going to really push up their rates, and then you have a marginally cheaper solution that doesn't have as much of a benefit to the end user.
[Bruce Silverman] But you know, you brought up a point a minute ago about how that particular company that you used as an example, their premium went from 800 to 400. A weak risk doesn't make as much money. In that scenario, however, you keep the lights on for that company, they keep everybody employed, they get to continue doing business, which is good for the business, the employees, the owners, the community, the customers, all of those things are a win win. And at the end of the day, they're going to go and they're going to recommend you to their friends that are having the same issues that they're having. So, you know, it's one of those situations where Elite Risk finds a solution keeps a business in business, and what do they do? They're gonna read verb, because when people have solutions, and when they're looking out for their customers, and not necessarily the bottom line every single time, that goes a long way with business owners.
[Henry Laville] I think so, I hope it would always be received that way. We were instrumental in the process because we wrote the access. So their standard access care was navigators, navigators a grant carriers, they're a real good too, for that industry. But navigators would ride over the risk retention group, we would, I put into our insuring agreement that if the million dollar doubling as a primary auto limit isn't met, as in if the risk retention group became insolvent, which we don't expect at all, placing the reinsurance but if it did, that the full calls that we've made, are, there's not any additional risk to us really with that insuring agreement and insulates us and it protects the insured, we are able to more or less match the premium from the excess, and indirectly getting the $400,000 of savings. So it was a big win. And I did feel good about it, for sure. And I would love to see it's kind of rolls off that. But I just really think it's a great solution. Beyond risk retention groups, there are also democratic rated auto carriers, as well as GL carriers. There's, there's one coming out very soon that, that we have a relationship with the folks who who are starting it used to work at a very large carrier, that specialized in concrete pumping and crane rigging, which are very hard markets and really interesting nuance classes of business. I'm excited about that, I think those are gonna be a great fit for a lot of people. They just don't have that am dense rain. But if you can look at their reinsurance and you can look at what they're what they're writing, like how much written premium there is, if you're a producer or an agent, you're concerned about their financials, you can look into those things, and see proportionately they may be very strong. A big thing about AMS ratings is quantitative, how much capacity Do you have? Well, do you really need 200 million billion trillion, whatever dollars of equity when you're writing $50 million a year, and you're paying, you know, 15 to $30,000, for this thing to $30 million in claims year, you don't know. So there's extra margin overhead there just to put a guarantee and make people feel better. That's, that's great if you absolutely need that. However, there are some businesses that really just want to keep their doors open or or make more margin sales or save up a wall just to have a more accurate approach equitable program down the road in the risk, and a lot of these are going to be great.
[Bruce Silverman] Before we finish up this episode, couple of things, folks again, Henry Laville with Elite Risk 225-317-4265, email@example.com. We talked about the solutions for the small carriers. And this is a question that I have because we know that these are hard conditions and hard environments to do business in right now. One claim one bad claim, can absolutely devastate a business put a business completely out of business unless they have the proper insurance.
[Henry Laville] Well, it can. And even with the proper insurance for, for instance, that risk I mentioned on the front side of this podcast, they had one really large claim where they had a driver that probably shouldn't have hired, they got rid of them. So they remedied the issue that one more claim shot their rates up. And the impact of that overhead increase crippled that business. It hurt them so severely that they were looking at even closing their doors selling their trucks or selling a lot of trucks downside and but all all of the outcomes they were looking at were negative and then bringing in a risk retention group and saving the extra 400k really made all the difference, but only one claim, put that put that situation in in place for them. So it's really a market environment where one event can be damning for for risk. And one loss doesn't make a bad risk. It really doesn't would you see in a bad risk as a trend of bad losses were no steps have been taken to prevent them from happening again. So their plan is just transfer all of our losses that we're doing nothing to prevent to an insurance carrier. And you would expect those folks to have some adverse outcomes in the insurance market. But unfortunately in our market, it really only takes one.
[Bruce Silverman] Creativity, creativity, creativity... I bring it up all the time. Whether it's a conversation with you or Jeff or Adam - It's it's all about you guys. Finding the square peg, round hole and making it fit. Sometimes it's it's shaving off a little bit over here sometimes it's, you know, taking a different look different approach looking at the problem from the 30,000 foot view sometimes you're on the ground, but creativity is really where it's where it's at with Victoria and Elite Risk.
[Henry Laville] Absolutely, absolutely.
[Bruce Silverman] Folks, he is Henry Laville. This is "Managing Risk for Tomorrow, Today" and today with Henry Laville. Once again 225-317-4265, firstname.lastname@example.org. Henry always a pleasure to learn so much from our discussions and from what Victoria and elite risks do to take care of their customers. And we'll see on the next episode.