Vortex. A Workers’ Compensation Exchange
Retain The Risk. Reap The Reward.
Retaining risk through high-deductible Workers’ Compensation (WC) plans will lower employers’ premiums. However, it doesn’t end there. Financing the retained risk in a captive insurance company can double the net benefit.
What is Vortex
Vortex is a Workers’ Compensation risk exchange operated by Vortex Re, a North Carolina-licensed reinsurance company. Participating captive insurance companies share a primary layer of risk amongst themselves. Each captive buys reinsurance for its own risk from Vortex Re, which in turn shares its assumed risk with the pool of participants by buying reinsurance from them.
Vortex Features and Benefits
Vortex Re is a strategic tool offering two significant benefits for participants. The program provides reinsurance coverage, thus reducing loss volatility. Just as important, Vortex creates true risk distribution, allowing participating captives to receive insurance company tax treatment.
Vortex operates on a calendar year basis, the Program Year. Annually, each captive’s ultimate expected workers’ comp losses (within the primary reinsured layer) are actuarially determined, forming the basis for its premium payment to Vortex Re. A single independent actuarial firm performs all valuations, ensuring a consistent and common methodology for each participant.
A participating captive receives a proportional percentage of all Vortex premiums and pool exposures. This proportion equates to the captive’s individual premium ceded to the pool.
Vortex employs several controls to protect captives against unexpected losses of other participants:
Captives only share risks within a narrow primary layer. Excess losses are retained by the ceding captive and are not part of the Vortex exchange.
Vortex employs an aggregate loss limit cap of 150% of expected losses. Any excess loss is retained by the ceding captive, thus limiting exposure to an adverse experience.
Vortex performs an annual premium assessment that considers past loss experience.
Qualifying For Vortex
Vortex Re anticipates that qualifying businesses:
• Currently have or will consider a high-deductible or self-insured Workers’ Compensation program
• Retain at least the first $100,000 per loss occurrence
• Demonstrate financial strength and favorable cash flow
• Be committed to risk management and loss control
• Provide historical 5-year loss data and exposure data
• Show willingness to form a captive or expand the use of an existing one
Retain the Risk. Reap the Reward.