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Underwriting Information: Nexus Re

How does it work?

Participants in the pool are charged a premium commensurate with their own projected loss experience. However, each participant shares in the risk of loss on any given account in the pool as a whole, subject to the limits of the treaty.

The Advantages

• Risk Conversion – By exchanging a captive’s own experience for that of the entire pool’s, coupled with Nexus Re’s historical prudence in underwriting, captives benefit from the smoothing effect of the pool – the effect of the law of large numbers.
• Predictability in Results – Primary or Working layer losses can be fairly predictable. This predictability is achieved by using generally accepted statistical methods based upon historical losses and exposures, coupled with over 25 years of (total) pool underwriting experience.
• Predictability in Payout Pattern – Currently, 85% of the portfolio relates to Workers’ Compensation (including Employers’ Liability) in the United States. This homogenous book of business makes for a smooth payout curve.
• Tailored Premiums - Rates are established based on a participant's unique risk profile and loss experience; not on the dictates of the market. Rating is based on 100% of predicted ultimate losses.
• Investment Income - Being a long-tail book of business affording coverage for Workers’ Compensation, Auto Liability, General Liability and Products Liability, a participating captive earns (significant) investment income on loss reserves. Importantly, investment strategy is at the sole discretion of the participant.
• Security - All funds paid into Nexus Re are fully secured. This ensures that the credit risk of other participants failing to live up to their underwriting obligations is minimized. Historically, no participant in Nexus Re has ever failed this credit risk test.
• Tax Efficient Risk Transfer – Pooling of risk may allow for parental tax deductibility. Pricing on an ultimate loss basis can result in accelerated tax deduction.
• Cash Flow - Accounts are rendered on a monthly basis to enhance cash flow to captives.

What does Nexus Re look for in a participant?

• A captive. This is a prerequisite for participation in the Nexus Re Pool. Further, the captive should be under the management of Aon Insurance Managers. Subject to special acceptance by United, the parent company of Nexus Re, this requirement may be waived. Nexus Re is willing to work with a prospective participant (sharing knowledge and experience) in helping it to establish a captive, should one not already exist
• The participant must be able to provide accurate historical loss and exposure data, by line of business – Workers Comp, AL, GL, Products.
• A minimum loss pick of $2.5 Million (in total, across all lines).
• A sophisticated Risk Manager and Risk Management department and one that has an appreciation of the risk-taking process, albeit in a controlled manner.
• A financially sound captive and parent.
• A Company that appreciates the long-term nature of participation in the pool.

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