Liability Insurance for Research

Transcription

1 Liability Insurance for Research

2 Current State Overview No Insurance, Self-Insurance, Captive Insurance Opportunity

3 Introduction Hamilton Health Sciences Corporation (HHSC) is a Health Insurance Reciprocal of Canada (HIROC) member HIROC covers for research activities in Canada Canadian Medical Protective Association supports physicians

4 Introduction Research conducted at HHSC for many years Typically relied on Sponsor s (pharma) liability coverage Originally carried no insurance for clinical trials

5 Introduction Starting to see pressure building: Significant research activities outside of Canada (including the US) Being asked to indemnify other sites participating in Canadian trials where we are the Sponsor (Investigator Initiated Trial (IIT)) Becoming concerned about having some coverage for epidemiology programs

6 Introduction Recognize changing research landscape Decline in industry sponsored clinical trials More than made up for by an increase in IIT We are actually seeing more REB submissions year over year End result is more risk exposure

7 Introduction What needs to be done: Compartmentalize and protect the organization so one part of the structure does not put other parts at risk Need to better identify and address risk through diligence and training Need to provide fair compensation when we make mistakes

8 Not realistic today No Insurance

9 Self Insurance We participate in a legal defense fund with 3 other institutions We have set aside funds for legal defense purposes

10 Captive Insurance A legally licensed limited-purpose property and casualty insurance company Main purpose is to insure the risk of its owners and companies affiliated with its owners

11 Captive Insurance Term captive was coined by Frederic M. Reiss working for Youngstown Sheet & Tube Company (Ohio) in the 1950 s (although this type of insurance likely began in the 1800 s when ship owners agreed to share the risk of their fleet losses) Youngstown owned a series of mines that provided raw materials exclusively to the corporation and these mines were referred to as captive mines Reiss helped Youngstown incorporate its own insurance subsidiary referred to as captive insurance companies since they provided insurance exclusively for the captive mines

12 Captive Insurance In the 60 s Reiss moved offshore where the regulatory environment was more conducive Bermuda is the largest offshore captive domicile followed by the Cayman Islands

13 Why Captive Insurance? Improved risk management and risk financing Lower first-dollar insurance cost Plugging gaps in commercial insurance coverage Improved cost control and internal tracking Access re-insurance market

14 Also: Why Captive Insurance? Insulation from market swings Internal smoothing of deductibles Tailored coverage Control over claims handling Cost

15 Why Captive Insurance? Taking all aspects (legal costs, profitability of winning/losing lawsuit, dividend payments and discipline) into account, captive structure offers higher flexibility and resolves inefficiencies in the insurance market Huber, S. Gruber, M, & Bank M. (2011) Moral hazard, insurers nonperformance and the captive alternative. Insurance Markets and Companies: Analyses and Actuarial Computations. 2(3), 43-55

16 Captive Insurance Steps Need to: Complete actuarial study Consider start-up expenses Consider capitalization requirements

17 Research Insurance Corporation Research Insurance Corporation Cell #1 Cell #2 Cell #3 Cell #4 Cell #5 HHS Reinsurance Program: Applicable to all segregated cells or individuals cells; Reinsurance is in excess of the risk retained in each cell. Notes: 1. Each cell is autonomous and shares costs with other cells and core captives; each cell benefits from its own experience. 2. All cells benefit from group buying power with respect to reinsurance

18 Questions? Frank Naus