Book 4 - Appraisal Institute of Canada

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I N S U R A N C E N E W S A N D V I E W SFirst ProfessionalLiability Insurance CompanyToday, we look at the state of the Appraisal Institute of Canada’sliability insurance program, as it approaches its secondanniversary as a captive insurance company.Brian DuncanAACI, P. App,President of the Board, FPLICLFPLICL – two years laterBy Brian Duncan, AACI, P. App, President of the Board, FPLICLs we approach the secondanniversary of the creationof the insurancesubsidiary company of theInstitute named First ProfessionalLiability Insurance Company Limited(FPLICL), it seems appropriate forme, as a President of FPLICL, toprovide you with an update of theprogress that has been made overthe past two years.As you may be aware, the membershipof the Institute approved thecreation of an insurance subsidiarycompany at the May 2005 annualmeeting of members. Subsequently,a corporation was created and theassets and liabilities of the Institute’sProfessional Liability InsuranceProgram (PLIP) were transferred to itin exchange for 100% ownership.The concept of establishing aninsurance subsidiary company orinsurance captive is nothing newand has been practiced by for-profitcorporations, primarily as a means ofreducing their tax burden. In recentyears, non-profit organizations,including professional associationsthat operate insurance programs onbehalf of their members, have alsotaken to establishing insurance subsidiarycompanies for another reason16C a n a d i a nAppraiserVolume 51 • book 4 • 2007EvaluateurC a n a d i e n– to prevent the possibility of anyliabilities associated with their insuranceprograms being attached to theparent organization itself.Before the creation of FPLICL,the Institute was exposed to claimsmade through the insurance program.Although improbable, acatastrophic claim could have compromisedthe very existence of theIn addition toprotecting theInstitute, the insurancesubsidiary, which isa separate corporateentity wholly ownedby AIC, is betterpositioned to seekout and obtain liabilityinsurance on theworld markets.Institute, and this is why the insurancesubsidiary was established. Inaddition to protecting the Institute,the insurance subsidiary, which isa separate corporate entity whollyowned by AIC, is better positionedto seek out and obtain liabilityinsurance on the world markets.Moreover, the insurance subsidiaryprovides the kind of flexibility thatthe old program did not have, withrespect to expanding and enhancingthe insurance program to accommodatespecialty appraisal services,e.g., machinery and equipment valuation,to name but one.FPLICL is domiciled in Barbados,a world centre for insurance captivesand, particularly, Canadian interests.Barbados was chosen over a numberof other captive jurisdictions worldwide,because it best addressed theInstitute’s needs for an insurancesubsidiary with low incorporationand overhead costs. The insurancesubsidiary takes its direction from athree-member board, which reportsto AIC, the sole shareholder. FPLICLis managed by a company under contractto it – Amphora Captive InsuranceManagers in Barbados. Claimsmanagement continues to be handledby the former Leonard French &
Co. Ltd., now SCM Adjusters CanadaLtd. in Winnipeg, while the insurancepolicy is issued by Travelers GuaranteeCompany of Canada.I am pleased to say that thisarrangement has worked well andthat, notwithstanding a few challengesrelated to the 2006 financialaudit, the insurance program ishealthy, the stabilization fund is instrong shape, and the needs of theprogram as recommended by ouractuary are being met. This is goodnews in several ways. First, we arein a positive position to weatherany downturns in the real estatemarket. Second, we have been ableto enhance the program by doublingthe coverage from $1 millionto $2 million, at no additional costto the members. In fact, over thepast three years, the program hasbeen able to rebate members from$10-$11 for non-fee members and$200-$700 for fee members. Lastyear, we also introduced a $25,000identity theft policy for each memberat no additional cost. But, low claimsand premium stability are only partof the story. The AIC Insurance AdvisoryCommittee continues to do acommendable job in ably advising onprogram recommendations, claimsmanagement and claims preventionmeasures that help to mitigateclaims and maintain and/or improveour low costs.In conclusion, the first two yearsof FPLICL’s operation have beenvery successful, and the financesof the corporation and the insurancestabilization fund are in verygood shape. In the coming year, Iam confident that we will be ableto pass on additional savings to themembership in the form of premiumrebates, as a result of our continuedlow claims experience combinedwith sound management practices.I look forward to continuing to serveas President of FPLICL in 2008,while seeking additional programenhancements to further strengthenand improve the program to benefitall AIC members.Pleased to congratulatethe Appraisal Institute of Canadaon its upcoming 70th anniversaryProud sponsor of the Appraisal Institute of Canada 2007 National ConferenceC a n a d i a nAppraiserE CVolume 51 • book 4 • 2007 valuateura n a d i e n 17
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Book 4 - Appraisal Institute of Canada

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