Archway Insurance Ltd. is a member-owned heterogeneous group captive domiciled in the Cayman Islands. Each shareholder has equal ownership and invests a one-time cash capitalization of $36,000. Each share is broken-out into two categories, $35,900 for a redeemable preference share, and $100 for a single common share. Each shareholder represents a single and equal vote on Archway Insurance Ltd.'s Board of Directors regardless of premium size.

Archway Insurance Ltd. operates on a five year accounting cycle, meaning it generally will declare dividends for an underwriting year three years after such individual underwriting year has ended. Archway Insurance Ltd. generally closes underwriting years five years after an underwriting year ends. Each underwriting year stands on its own.

Each Archway Insurance Ltd. members' premiums are developed annually through the use of an actuarially determined loss forecast. To develop a member's annual premium, each member’s previous five-year loss history is collected and the data is then trended and developed by Archway Insurance Ltd.'s actuarial service provider. They then produce what they believe a member’s predictable losses will be, plus what should be allocated for shock losses above $125,000. Operating costs for the program such as excess reinsurance, policy issuance, claims service, brokerage, administration, etc. are calculated and allocated for each member. Finally, a member’s loss fund and allocated share of operating costs are added together, producing their premium for each year. The intent of the Archway Insurance Ltd. premium calculation formula is that each member generally pays a premium expected to fund for its ultimate losses while allowing for risk sharing and risk shifting amongst the entire membership for shock losses. Because each member is expected to pay their own losses, up to a reasonable level, a member can be billed additional premium up to a predetermined amount should their losses exceed expected levels.

Simply put, expected losses are funded by the member as premium and allocated to that member's individual equity account, within Archway Insurance Ltd., until losses are paid. The account earns investment income on its equity balance until that specific underwriting year is closed. At that time, the "tail" liability is sold or transferred to a tail fund and the remaining equity balances, including investment income, are disbursed in correlation to the final performance of each member.

Purchasing both specific and aggregate excess insurance protects Archway Insurance Ltd. and its members. Specific excess reinsurance protects the captive against a single catastrophic loss. The aggregate excess protects the captive against a high number of frequency losses that fall within Archway Insurance Ltd.'s retained limit. Combined, these coverages provide Archway Insurance Ltd. members with the comfort of a loss "cap" at a predetermined level for each policy year. The "maximum" premium payable by a member is generally two times the A Fund, plus the B Fund, plus Operating Costs. The concept is based upon controlling the predictable losses and reinsuring away the unpredictable losses.

As was mentioned, each Archway Insurance Ltd. member has a potential premium assessment obligation to the captive of one additional "A" Fund per underwriting year. As a result, each member must provide a letter of credit or cash security equal to 2/3rds of its "A" Fund. An additional 2/3rd's of "A" will be posted for each additional underwriting year up to a maximum of 200% of the average "A" Fund for the most recent three year period. This provides member-to-member security, and supports a single letter of credit provided by Archway Insurance Ltd. to the carrier (Old Republic) that issues the actual policies to the members.