Temporary Services Insurance Ltd. is a member-owned homogeneous group captive domiciled in the Cayman Islands. Each Shareholder has equal ownership and invests a one-time cash contribution. Each Shareholder appoints one director with a single and equal vote on Temporary Services Insurance Ltd.'s Board of Directors regardless of premium size.
Temporary Services Insurance Ltd. generally operates on a five year accounting cycle, meaning it generally will declare an interim distribution for an underwriting year three years after an individual underwriting year has ended. Each underwriting year stands on its own. Temporary Services Insurance Ltd. closes underwriting years, five years after an underwriting year ends.
Each Temporary Services Insurance Ltd. member's premium is developed through the use of an actuarially determined loss forecast. The actuary will use five years of the member's own loss history for Workers' Compensation Insurance. The loss funding, derived from the actuarial forecast, is broken-out into two categories by the actuary known as the "A & B" Funds. The "A" Fund pays for the first $125,000 of any loss and the "B" Fund contributes to the remainder of the company's loss layer up to $400,000 total per occurrence. Temporary Services Insurance Ltd. is designed by its members to have an acceptable level of risk sharing.
Simply put, expected losses are funded by the member as premium and net premium is credited to that members' account, within Temporary Services Insurance Ltd., until losses are paid. Each member receives a credit of net investment income on its account balance until that specific underwriting year is closed. Each members' account is charged a portion of the Company's operating costs. When the underwriting year is closed, the "tail" liability is generally sold and the remaining account balances for such year, including remaining net investment income, are disbursed in correlation to the final performance of each member.
Purchasing both specific and aggregate excess insurance helps protect Temporary Services Insurance Ltd. and its members. Specific excess reinsurance protects the captive against a single catastrophic loss. The aggregate excess protects the captive against a high number of frequency losses that fall within Temporary Services Insurance Ltd.'s retained limit. Combined, these coverages provide Temporary Services Insurance Ltd. members with the comfort of a loss "cap" at a predetermined level for each policy year. Generally, the "maximum" premium in Temporary Services Insurance Ltd. is 2.6 times the "A" Fund, plus the "B" Fund, plus Operating Costs. The concept is based upon controlling the predictable losses and reinsuring away the unpredictable losses.
As mentioned, each Temporary Services Insurance Ltd. member generally has a potential additional premium obligation in the assessment of an additional 1.6 "A" Fund payment. As a result, each member must provide a letter of credit or cash security equal to 2/3rds of its "A" Fund. An additional 2/3rd's of "A" will be posted for each additional underwriting year up to a maximum of 200% of the average "A" Fund for the most recent three year period. This provides member-to-member security and supports a single back-to-back letter of credit to the policy-issuing carrier (Zurich American Insurance Company).