Partnering to Deliver Performance-Based Service

The Housing Partnership Insurance operates through partnerships and contractual relationships with a team of highly regarded insurance professionals. As general manager of the Housing Partnership Insurance, the Network negotiates these business arrangements to provide the best value and service to its stockholders and members. One of the principal benefits of a captive insurance company is its ability to "unbundle" functions so they can be provided in a cost-effective and performance-based manner.

Underwriting and Risk Management

The Housing Partnership Insurance has engaged IMA Financial Group, an innovative leader in the insurance brokerage and risk management business, to underwrite program applicants on behalf of Lexington Insurance and Housing Partnership Insurance. IMA served as a consultant to the Housing Partnership Network in the creation of the captive insurance program and in the negotiation of the fronting carrier and reinsurance contracts. IMA issues policies on behalf of Lexington, and oversees claims management, premium collections, and customer service. Risk control assessments, safety training, and related services are provided to Housing Partnership Insurance insured parties by IMA's Risk Control Services.

Claims

The Housing Partnership Insurance has engaged a nationally known and highly regarded claims administrator, Broadspire, to provide claims service to participants. Members contact Broadspire and the program administrator, IMA, to report claims and receive 24-hour customer service.

Captive Management

Smith Bell & Thompson in Burlington, Vermont, serves as captive manager. It is responsible for financial management and compliance with the captive insurance regulations of the State of Vermont, the legal domicile for Housing Partnership Insurance.

Legal

Downs Rachlin Martin, the law firm with the largest captive insurance experience in Vermont, serves as legal counsel.

Fronting Carriers

Lexington Insurance writes the policies and pays all claims. It is a subsidiary of the American International Group (AIG), the world's largest insurance company, which has an A++ rating by AM Best. Lexington is reinsured for the first $500,000 loss on each claim by the Housing Partnership Insurance, and losses above $500,000 are reimbursed through reinsurance contracts provided by Lexington and Lloyd's of London.

Capitalization

The Merrill Lynch Community Development Company has played a key role in providing capital and other collateral to launch the Housing Partership Insurance. The Housing Partnership Network and Merrill Lynch funded a credit facility—Housing Partnership Ventures—to provide financing for stock purchases. Merrill Lynch provided a $5 million loan and the Network invested $2 million in a loss reserve. Through this financing vehicle, the 17 member-owners of the Housing Partnership Insurance have borrowed and invested more than $3 million to date in the captive. Merrill Lynch has also agreed to provide standby letters of credit (LOCs) of up to $2.5 million as additional collateral.

Corporate Management

On behalf of the board of the Housing Partnership Insurance, the Housing Partnership Network has hired an experienced general manager to facilitate governance and oversee operations, including contractor performance. The Network negotiates the fee arrangements, executes contracts, and ensures that the captive's finances are structured properly. Recommendations are made by the Network to the Housing Partnership Insurance board, and subsequently to the stockholders, on issues including capitalization, new business lines, new owner underwriting, and dividend distribution policies.