Components
strategy | innovation | expertiseInsurance Policy
Either R&Q Quest, or a licensed and admitted insurance company (fronting company of the participant’s choice), will issue an insurance policy to the insured. For that policy the insured will pay a premium determined by state rating formulas or expected losses plus fixed costs.
Reinsurance Agreement (if a fronted policy)
The fronting company will deduct operating expenses from the program premium and cede the balance (the loss fund) to the RAC via a reinsurance agreement. Under the terms of the agreement the RAC will participate in losses up to a specific and aggregate limit. The specific and aggregate stop loss provided will be based on the program participant’s risk appetite and evaluation of historical loss data.
The Indemnification Agreement
The Indemnification Agreement guarantees the return of underwriting profit (premiums less expenses and losses) and investment income directly to the program participant. The Agreement also indemnifies R&Q Quest for any losses incurred on the program.
Segregated Accounting
Each RAC program stands alone and does not share risk with any other program thus guaranteeing that underwriting profit is determined solely by its own loss experience. There is no pooling of risks or funds with other participants.
Collateral
In most cases the loss fund is not sufficient to completely fund the aggregate liability. In this case the program participant must fund the difference through a letter of credit, cash or other acceptable security.
Investment Policy
Provided that Quest is satisfied with the security of such investments, funds may be invested in accordance with the participant’s instructions.