Frequently Asked Questions
Why does the Program Require Capitalization?
Regulators, reinsurers, and – most importantly – the members, want to be certain TRS RRG is financially capable of not only meeting the expected losses, but also unexpected losses. Upfront capital contributions provide the program with immediate wherewithal to ensure long-term stability. In addition, TRS RRG was formed to be a permanent risk management and insurance solution. Only facilities that are fully committed to its success can justify the capital contribution. Requiring capital from all members ensures all have a vested interest in its success. We refer to this as having “Skin in the Game”.
What is meant by Subscriber’s Equity?
All allocations and paid-in capital are assigned to the subscriber accounts, building in value over time. Most members show some part of their account value as Balance Sheet assets on their own facility financial statements. As of 12/31/2012 there is over $5 million of subscriber equity.
Is the Income Allocation Actually Distributed/Returned?
Allocations may be in the form of paper transactions, credits, actual distributions, or any combination. The actuary and regulators annually review the financial position of TRS RRG and provide guidance/approval to the SAC. Allocations occur every year- over $4.5 million since 2004, and actual distributions, over $1.5 million, have been declared in several years – when regulators and the SAC are confident all losses for the policy period are contained.
What happens to our Savings and Surplus Accounts if we Leave the Program?
Both accounts belong to the subscriber and the positive balances will be returned after the waiting period as established in the bylaws/program documents and upon actuarial opinion that the funds would not be needed for program liabilities.
Can Members be Assessed in TRS RRG?
There is a limited assessment clause in the event liabilities exceed both the conservatively developed premiums and the collected capitalization/surplus. In addition, the Subscriber Advisory Committee (SAC), with input from the members, may select coverage/structures that have a retrospective rating formula. There is an absolute cap on the assessment, which is equal to no more than each subscriber’s capitalization- on an annual basis.
Does TRS RRG Purchase Reinsurance?
Absolutely. The members of TRS insisted reinsurance be in place prior to launching. TRS RRG reinsurers provide protection in the event any one loss exceeds the TRS retention of $250,000, protecting the program from catastrophic losses.
How are Premiums Determined?
Base rates are actuarially set for the various care levels. Upon completion of a detailed risk management assessment, merit factors (credits and debits) are applied to the base rates to reflect the historical and expected performance of each individual member.