History, Mission & Overview

Manufacturing and Service (M & S) was created to meet the needs of businesses to obtain insurance coverage at affordable rates. The founders of the Company perceived that the commercial insurance industry was not responsive to this basic commercial necessity.

The mission of M & S is to provide the highest quality insurance protection and services for its shareholders. By bonding together to create true sharing of risk, the shareholders can control their insurance costs and avoid the volatility of the general insurance industry. Additional benefits are created through the increased assurance of coverage, the stabilization of premiums and the improved management of risk through effective loss control.

The Company, through the active participation of its shareholders, will endeavor to provide the long-term security of a well-managed offshore insurance company. To meet this goal, only those providers of services that can meet the highest standards of excellence shall be associated with the Company. From the very beginning, only known experts in their respective field of insurance support services were used in the formation of the Company.


Structure and Shareholders Involvement

The Company is licensed and managed in the Cayman Islands to reinsure risks from the issuing insurance company, which is licensed and provides coverage in the United States. The types of coverage underwritten by M & S are Workers' Compensation, Automobile, and General Liability.

Each Shareholder, regardless of premium size, has one vote. A simple majority by the Board of Directors governs. The Company follows a three-year accounting cycle. Each year will stand-alone and will not be closed until the end of the third year after the policy year-end or as determined by the Board of Directors.

The Company's management strength lies in its strong committee structure and individual involvement by shareholders. Presently, the committees and their primary responsibilities are:

• Underwriting - Advises the Board on desirable risks to be assumed and ensures that the assumed risks are adequately underwritten;
  
  
• Risk Control - Sets loss control goals for the members. Reviews loss control reports and works with members to meet the required loss control goals of the Company;
  
  
• Finance and Investment - Advises the Board on policies for the investment of the Company's assets and reviews the annual audited financial statements.

Each shareholder is encouraged to attend all M & S meetings and actively participate on the committee of his/her choice. The Board will rely on the recommendations of these committees to establish policies.


Support Structure/Responsibilities

There are many component parts of a successful program. M & S uses the best professionals, each with a defined set of tasks that as a whole create the best program for its members. These professionals are listed below, together with a description of the services provided by each.

• Captive Resources, LLC (Consultant) - The consultant, as an independent contractor, has the ultimate responsibility to the Board of Directors to see that all decisions of the Board are carried out by its support structure members. It is involved as a nonvoting member in all executive meetings and assists the President and Executive Committee in the planning of these meetings.
  
  
• InterWest Insurance Services, Inc. (Broker) - The insurance broker, as an independent contractor, is responsible for all insurance aspects of the Program including coordination of policy issuance, billing and premium collection, placement of coverage not available in M & S, and certificates of insurance and vehicle I.D. card issuance.
  
  
• Kensington Management Group Ltd. (Underwriting Manager) - The underwriting manager is responsible for managing the day-to-day operations of the company and is therefore, located in the Cayman Islands. This primarily consists of managing the financial operations of the company and accounting for all financial transactions. It also prepares and maintains the corporate and statutory records including minutes of meetings and advises the members on developments in insurance and fiscal matters as they affect insurance companies in the Cayman Islands.
  
  
• Discover P&C (Program Insurance Co.) - The Program Insurance Company issues the actual policies that "insure" the shareholders of the Company. Discover P&C is a licensed, "A" rated insurance carrier, which addresses the legal requirements of providing insurance for the shareholders.
  
  
• Discover RE (Specific Excess Reinsurer) - The specific excess reinsurer is "ceded" the shock loss or large loss layer, on a per occurrence basis, that the Company is not willing to retain. It receives a premium for its participation in this layer and pays all claims in this layer.
  
  
• Pinnacle Actuarial Resources, Inc. (Actuarial Firm) - The actuarial firm, as an independent contractor, takes loss data supplied by the shareholders and compiled by the broker and, after trending and developing this data, sets a "loss pick" for each member upon which the member's final premium is based.
  
  
• Gallagher Bassett Services (Claims Administration Service) - The Program Insurer employs an independent contractor to negotiate and settle all claims against its shareholder insureds.
  
  
• Loss Prevention Services - Serious emphasis is placed by the shareholder insureds within their own companies, on good loss prevention practices. Members realize that through good loss prevention, claims can be prevented, which helps lower costs. The Company has its own Loss Control Committee, which develops standards and goals that members must strive to achieve. Risk Consultants is hired as an independent contractor by the Company to periodically visit each member's facilities to assist in achieving these standards and rate, on a point system, a shareholder insured's progress toward these goals.
  
  
• PricewaterhouseCoopers (Auditors) - While the financial reports are prepared by the Cayman Island managers, Kensington, they are audited by PwC in accordance with U.S. generally accepted auditing standards. Tax preparation for M & S is handled by Ernst & Young.
  
  
• Royal Bank of Canada - Provides banking and investment services
  to M & S.

Premium Development

M & S has developed an experience rated formula to be used in calculating a member's premium for each year. It is primarily based on a member's expected loss history.

The following is a brief outline:

• The intent of the formula is that each member pays a premium to fund for its ultimate losses but it allows for risk sharing and risk shifting amongst the entire membership for shock losses.
  
  
• To develop individual members' premium, each member's previous five-year loss history is collected and the data is then trended and developed by M & S's actuarial firm. The actuary then produces what it believes a member's predictable losses will be, plus what should be reserved for shock losses (losses above $100,000). This becomes the member's loss fund.
  
  
• Next, the operating costs of the program such as excess reinsurance, fronting costs, claims service, etc. are calculated for each member.
  
  
• Finally, the contributions to the loss fund and operating costs are added together, producing a member's annual premium.

In addition to premium charges, a member can be assessed up to a predetermined amount if its expected losses exceed its contribution for the year.


Summary

M & S, through the active participation of its shareholders, endeavors to provide the long-term security of a well-managed insurance company. The preceding is an overview of the Company only, and complete details of all operations are available. Through the M & S program, shareholders have indeed taken control of their insurance destiny. 

» Contact Mike McStocker for more information.