History of the Company
In the 1970s Californians were facing a health care crisis directly related to the frequency of medical injury claims and the soaring cost of malpractice jury awards paid by medical malpractice insurance companies. As early as 1972, insurance carriers were paying claims in excess of $150 for each $100 collected in premiums. Operating costs increased the loss/premium ratio to $180 paid out for each $100 of premiums collected. The result was a destabilized medical liability insurance market. On January 1, 1975, two major carriers notified Southern Californian physicians that their coverage would not be renewed. Northern California physicians faced premium increases up to 380%. To many California physicians, medical malpractice insurance coverage became either unavailable or cost prohibitive. Physicians were faced with the choices of 1) retire from practice; 2) move to a state where they could afford to pay the premiums; or 3) “go bare” and treat their patients without having the insurance coverage needed to protect themselves from potential losses due to claims.
Some San Francisco physicians practicing at California Pacific Medical Center (CPMC) (formerly Children's Hospital and Presbyterian Hospital) determined that none of these choices were acceptable to them or to their patients. They came up with a fourth choice—to start their own offshore captive insurance company. There were several advantages to the offshore captive, i.e., captives require less capitalization than traditional insurance companies, fewer regulatory constraints are placed on the business, and the captive could be established quickly to solve the immediate problem of patients’ access to health care.
In 1975, Physicians Reimbursement Fund, Ltd., (PRF, Ltd.) was organized to provide professional liability insurance coverage to 70 San Francisco physicians. The first premiums were written in May of 1976, and PRF, Ltd., was officially in business. Thirty years later, 12 of the original 70 physicians are still in practice and still insured by Physicians Reimbursement Fund (PRF).
Over the course of these past 30 years PRF has adapted to the changing medical malpractice insurance environment to ensure that PRF’s Insureds can depend on the coverage they may need for pending and future claims. The chart in Figure 1 shows the changes in limits of coverage. There have also been organizational changes to meet the changing needs of our Insureds. These changes are outlined in Figure 2.
Keene, Barry Assemblyman. History of the Creation of MICRA. CAPP. Summary of an article published in 1975 by the National Conference of State Legislators and Georgetown University’s Health Policy Center as part of a report entitled “A Legislator’s Guide to the Medical Malpractice Issue.”
LIMITS OF COVERAGE |
|
|
Year(s) |
Per Occurrence |
Aggregate (per policy period) |
1976-1978 |
$150,000 |
$450,000 |
1979 |
$200,000 |
$600,000 |
1980-1987 |
$250,000 |
$600,000 |
1988-1990 |
$500,000 |
$1,500,000 |
1991-2000 |
$500,000 |
$1,500,000 |
2002-2006 |
$1,000,000 |
$3,000,000 |
Figure 1
ORGANIZATIONAL CHANGES |
|
|
|
Year Founded |
Organizational Occurrence (Company founded/reinsurance purchased) |
Function |
Structure/Place of Domicile |
1976 |
Physicians Reimbursement Fund, Ltd. |
Coverage: $150,000 per claim/$450,000 aggregate coverage per policy period. Increase in limits of coverage shown in Figure 1. |
Offshore captive domiciled in Cayman |
1986 |
Physicians Excess Insurance Company, Ltd. (PEIC) |
To cover losses >$500,000 (Aggregate coverage up to $1,000,000 per claim/$3,000,000 per policy period) |
Offshore captive domiciled in Anguilla |
1998 |
Physicians Reimbursement Fund, Inc., A Risk Retention Group (PRF-RRG) |
To change structure of PRF from offshore captive to onshore risk retention group |
Risk retention group (RRG) domiciled in Vermont |
2001 |
Reinsurance purchased for excess level of coverage (>$500,000) |
Shifted liability for Excess layer of loss (>$500,000) from PEIC to reinsurer |
Purchased from Pro-Mutual |
2003 |
PRF-RRG retains liability for full limits of coverage. Reinsurance contract not renewed. |
Change in business plan: PRF-RRG retains full limits of liability for claims arising from incidents occurring from Jan. 1, 2001 forward |
Vermont remains state of domicile |
Figure 2
PRF’s Founding Objectives
The founding objectives of PRF, Ltd., were to:
- Eliminate the overhead expenses inherent in commercial insurance coverage;
- Implement a philosophy in risk and claims management, which involved early identification and resolution of patient problems before they turn into lawsuits;
- Retain for the owner-physicians the benefit of these efficiencies in the form of stable, below market insurance premiums, and;
- Offer occurrence based coverage (not claims made) thereby allowing its Insureds an increased sense of security and freedom in terms of their individual choice of practice.
In its 30 years of successful operation, PRF has evolved from an offshore captive insurance company to a fully regulated onshore risk retention group, and the Company has almost quadrupled its membership. While PRF remains loyal to its founding objectives, the Company continues to meet the changing needs of its Insureds. PRF’s proven dependability and integrity provides our Insureds with the security to practice medicine and provides patients with the access to health care.