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Loss Sensitive (Deductible) Programs

Who should consider a loss sensitive program?

Loss sensitive (also known as deductible) programs are structured with a common philosophy in mind – businesses that share in the risk or have “skin in the game” typically have better loss control programs, a sophisticated philosophy of risk management and profitable insurance programs. A loss sensitive program is an ideal form of alternative risk financing for progressive organizations that share such qualities as:

  • Confidence in their risk management programs
  • Willingness to “share the risk”
  • Progressive, forward-thinking leadership
  • Strong commitment to safety, with solid safety programs in place
  • Better-than-average loss histories within their respective industries
  • Minimum annual premiums of $250,000 for general liability, commercial auto and workers’ compensation
  • Ability to fulfill potential collateral requirements

Deductible Programs

By utilizing higher deductibles in significant coverage areas, such as workers’ compensation, general liability and/or commercial auto, larger companies can reduce premium costs, improve premium stability, increase cash flow and control claims management. Typical deductibles in this model range from $25,000 to more than $1 million per occurrence, but smaller companies can take advantage of deductibles less than $25,000. 

Not only does aggregating your deductibles give you the capabilities to budget the maximum payout (worst case scenario) you could face in a calendar year, your organization also benefits from lower premiums and more security by placing a cap on the out-of-pocket costs you could have during a specific time frame. 

Deductible programs often require collateral in the form of letters of credit, escrow funds or cash for insurance carriers. If Gibraltar determines this type of program is right for your business, we’ll conduct an in-depth collateral review utilizing both in-house and third-party actuarial services to help negotiate the best possible collateral terms available.

Retrospective Rating Plan

A retrospective rating plan is a strategic cash flow tool that allows businesses to hold loss reserves until they are paid in claims. Generally subject to both minimum and maximum premiums, these plans offer premiums based on actual losses incurred during a specific policy period, rather than requiring you to pay on chance. This alternative risk financing strategy is most frequently used with workers’ compensation and general liability because of the tendency for these claims to develop slowly over a period of time.

Retrospective rating programs also tend to require collateral in the form of letters of credit, escrow funds or cash for insurance carriers. If Gibraltar determines this type of program is right for your business, we’ll conduct an in-depth collateral review utilizing both in-house and third-party actuarial services to help negotiate the best possible collateral terms available.