In accordance with tax laws and regulations applicable to reciprocal insurers, Pine Tree is able to minimize its federal income tax obligation by allocating its annual profits to each participant’s “Subscribers’ Savings Account” (“SSA”). Pine Tree subscribers typically pay no federal income taxes on these SSA allocations as a result of their tax exempt status.
Each subscriber is underwritten annually to include current institutional activity and claim experience.
Pine Tree’s underwriting standards integrate industry credentialing standards to avoid duplication of hospital staff efforts. Physician applications that do not meet underwriting standards are referred to the commercial market for coverage. Requests for retro date coverage on physicians with clean histories are reviewed by the Pine Tree’s governing body for consideration. All covered physicians are reviewed annually.
Costs per unit of risk have remained stable, and have trended lower for more than ten years.
Subscribers currently share an aggregate pool of $21,000,000 of coverage limits, a portion of which is purchased jointly by the subscribers from the commercial excess market. The adequacy of the aggregate coverage is evaluated by the subscribers and the program broker each year.
Pine Tree had $7M in surplus in addition to its claim reserves at 31 Mar 10. Pine Tree’s equity-to-premium ratio at 31 Dec 09 was 2.49 to 1, well above the industry average of .82 to 1.
Pine Tree has conservatively managed its investment portfolio of investment grade bonds. Our investment result, while not guaranteeing future performance, has included significant returns for Pine Tree.
Pine Tree has successfully provided competitively priced coverage since inception. Pine Tree premiums are billed to Subscribers on a quarterly basis rather than annually.
Premiums reflect the success of claims and risk management both in total and as allocated to the individual subscribers.
In 2009 and 2010, Pine Tree distributed a total of $1.7M from its earnings to subscribers.
Pine Tree is owned and controlled by independent unrelated hospitals. Governance control is shared equally, one hospital one vote. Subscribers select their own defense counsel to handle their claims.
Members provide senior administrative staff to fulfill the fiduciary responsibilities of governance by participating in the Subscribers’ Advisory Committee (SAC).
The participants in the SAC represent more than 50 years of alternative insurance management experience. The SAC is supported by a team of professionals to attend to the operations of Pine Tree.
