The Art of Self-Insurance
Max Koonce, Senior Director, Risk Management, Walmart Stores, Inc.
Marc Salm, Vice President, Risk Management, Publix Super Markets, Inc.
Dave North, President and CEO, Sedgwick
Session FIN201
Wednesday, April 18, 2012
10:15 a.m. - 11:30 a.m.
Dave North
President and CEO
Sedgwick
2
What is
self-insurance?
3
How does
self-insurance
compare to
alternative
programs?
4
What are the
keys to an
effective
self-insurance
program?
5
What are the
current
realities
facing
self-insurers
today?
6
7
Publix Super Markets
• Publix Super Markets, Inc. is
a private but widely held
grocery company with its
corporate headquarters in
Lakeland, Florida.
• Publix is the largest
employee–owned grocery
store in the United States.
8
Publix Super Markets
• Publix operates 1051 stores in
five southern states: Florida,
Georgia, South Carolina,
Tennessee and Alabama.
• In 2011, Publix sales were
over $27 billion.
9
Publix Super Markets
In 2011, Publix was ranked
No. 102 by FORTUNE®.
Publix has been recognized for 14 years
straight as one of FORTUNE® magazine's
"100 Best Companies to Work For."
10
Publix’s Casualty Program
• Self-insured
retentions
• Deductibles
• Corridors
• “Step ups”
• Self administration of claims
• Third party administration of
claims
All designed with the help of our broker.
11
WC
General
Liability
Druggist
Fleet
D&O
Deductible
Deductible
Fiduciary
Deductible
SIR
SIR
Step Up Ded (one
time)
Front
Front
SIR
Deductible
SIR
Deductible
Corridor
Deductible
Corridor
Deductible
Publix’s Retentions
ODL
(outside
boards)
Professional
E&O
Publix
Charities
12
Program Flexibility / Cash Flow
Evolution of a Casualty Program
Alternative
Risk Finance
Objectives


Self-Insurance
Captive

Loss Sensitive
Plans
High Deductible
Guaranteed
Cost
Financial Volatility


Minimize Total Cost of
Risk and corporate
SG&A
Optimize the
efficiency of the
insurance purchase
Understand and
control (where
possible) impact to F/S
Manage internal
business unit budgets
and behavior
Maximize claim
control (management
and settlement)
13
Risk Finance – Decision Process
Quantify Risk @
Retention Options
Transfer
Insurance
No
Post-Loss Funding
Options
Keep
Retention Decision
Funding Decision
Pre-Loss Funding Strategy
Guaranteed Cost
Small Deductible
Large Deductible
Self-Insurance
14
Considerations Impacting Design
Financial
• Cash position
• Effective tax rate
• Cost of capital
• LOC capacity & cost
Operational
• Need for admitted paper
(vendors, regulators)
• Cost predictability
• Risk tolerance
15
Guaranteed Cost

Simple

TCOR = GC premium

100% of risk transferred
to insurer

Budget certainty

No collateral and escrow

Claims administration
included

Works for low risk
tolerance; high corporate
tax rate

No cash flow advantage

Driven more by carrier
portfolio rather than
individual risk

No immediate credit for
good loss experience

No real control over
claims handling
16