Asphalt Paving Company
A prominent asphalt paving company in New York City, with contracts from key city and government entities, was struggling with rising insurance costs. Despite ongoing safety improvements and claims management efforts, the company faced steep increases in insurance premiums, especially in general liability coverage. They were referred to Union Risk Services for a more cost-efficient and sustainable solution.
- Industry: Construction/Asphalt Paving
- Location: New York City – Operating in 3 States
- Annual Revenue: $70 million
- Total Premium: $6,500,000
Challenges
- Escalating Premium Costs: General liability rates had climbed to $890 per $1,000 of payroll.
- Traditional Market Limitations: The company had little control over how premiums were structured or how their claims experience impacted rates.
- Profitability Impact: Increasing insurance expenses were cutting into the company’s profit margins and hindering growth opportunities.
Union Risk Services’ Solution
Union Risk Services introduced the company to a group captive program, allowing them to transition away from the traditional insurance market. The captive structure offered more control over claims management, underwriting, and risk-sharing, providing the company with a long-term solution to their rising insurance costs.
Results
✔ Reduced General Liability Premium: In the first year within the captive, the company’s general liability rate dropped from $890 to $490 per $1,000 of payroll.
✔ Lower Overall Premium: The total premium decreased from approximately $7.5 to $8 million to around $6 million after transitioning into the captive.
✔ Increased Control and Stability: The captive provided greater control over claims handling, loss prevention, and premium rates, which stabilized the company’s insurance expenses and improved cash flow.
✔ Increased Enterprise Value: By improving their bottom line through reduced insurance costs and greater risk management control, the company enhanced its overall enterprise value, making it a more attractive prospect for future business opportunities and potential investors.
✔ Future Savings Potential: As the company continues to improve its loss ratio, it can further reduce premiums and share in the captive’s profits, creating long-term savings and enhancing operational stability.
Conclusion
By moving into a group captive, the New York City Asphalt Paving Company significantly reduced its insurance costs and gained more control over its risk management. The result was not only immediate savings but also a pathway toward more predictable and manageable future insurance expenses, while simultaneously increasing the company’s enterprise value.
We work closely with our clients' tax, financial, and legal teams to evaluate the information within their portfolio and ensure that any planning concepts are seamlessly integrated into their overall financial landscape.