Palmetto Captive Journal

CaptiveInsuranceThe

CaptiveInsurance

J O U R N A L2nd Quarter 2012

Why Would a Corporation PurchaseBenefits Through a Captive?

Captive insurance companies are formed toinsure the risks of the parent corporation(single parent captive), companies that arepart of an affiliated group (group captive),members of an association (associationcaptive) or an agent or brokerage group.The most common form of insurancecoverage issued by the captive insurancecompanies in today’s market place isproperty and casualty insurance. There is a large untapped market for captiveinsurance companies to provide specific life insurance coverages to achieve valuablerisk and financial objectives.

The reasons to form a property and casualtycaptive insurance company are generallywell known—a partial list includes obtaininginsurance with reduced reliance on thecommercial marketplace, a lower premiumwhich reduces the cost of the risk, an abilityto design customized insurance programs,an ability to direct the investment option, the creation of a profit center providing the company with the ability to earn anadditional source of profits, and access toreinsurance and capital markets.

The same reasons and strategicbenefits obtained by a P&C captivewould be applicable to a life insurancetransaction. Recent ERISA legislativedevelopments, rising employee benefits, and the need for unrelated business haveincreased the number of the employeebenefits placed in captives. The list ofinsurance coverages typically include retiree medical coverage, stop loss medical,group term life, disability and executiveretirement plans.

Why Would a Corporation Purchase Life Insurance?

The purpose of this article is to propose that another major coverage that could be added to a P&C captive is Key Man andCorporate Owned (COLI) Life Insurance.Typically, these coverages do not fall underERISSA regulations.

Key Man Policy: Policy benefit payments received by the company under a Key Man Life Insurance policy can be used to provide protection against financial loss resulting from the death of a key executive.

Benefits of Life Insurancein a Captive

I N T H I S I S S U E

Page 2Benefits of Life Insurance in aCaptive

Page 3-62012 Conference Information and Schedule

Page 7Captive Academy / ContinuingEducation Credits

Page 82012 Conference Featured Speaker:Dr. Patrick Hickey

Page 9-102012 Conference EducationalSessions

12012 Conference Educational Form

Adding Life Insurance to a P&C Captive canresult in many benefits for the captive andits owner.

— By Jeffrey Altman, FSA, MAAABartlett Actuarial Group

The Captive Insurance JournalSecond Quarter, 2012

Managing EditorLaura Stuckey

Design/GraphicsFlorence Design, Inc.

Editorial and Advertising OfficePO Box 1763Columbia, SC 29202855-CAPTIVE

SOUTH CAROLINA CAPTIVE INSURANCE ASSOCIATION 2012 DIRECTORS & OFFICERSChairman of the BoardThomas A. BrumgardtNelson Mullins Riley & Scarborough, LLP

Treasurer/Corporate SecretaryAndrea Bartlett Bartlett Actuarial Group, Ltd.

DirectorsRandy CollinsKoppers Assurance, Inc.

Michael CoulterAon Insurance Managers (USA)

Gavin FoggonMarsh Management Services Inc.

Margie HeggieSC Physician Assurance Co. / SCMA

Chris StormerBauknight Pietras & Stormer, PA

Executive DirectorAndi Rawl

© Copyright 2012SC Captive Insurance Association

Corporate Owned Life Insurance Policy: The amounts received from a Corporate Owned Life Insurance policy can be used to pay for Deferred Compensation payments to employees and to fund other long term commitments of the company.

What Additional Benefits AreGenerated by having a Captive Issue COLI and Key Man Policies to its Parent?

A variable COLI policy or Key Man LifeInsurance contract issued by the captiveprovides financial benefits to the captiveinsurance company and its parent company.These additional benefits include the abilityto earn additional underwriting profits,flexibility in defining life insurance benefits,and the issuance of the insurance at a much lower cost structure. In addition, theinvestment options present under a variableCOLI life insurance policy provides the abilityto earn equity investment returns presentwith stock market portfolios.

Is There Favorable Tax Treatment for Life Insurance Policies Issued by a Captive?

To receive favorable tax treatment for aCOLI or Keyman life insurance policy, thedeath benefits, policy loan proceeds, andthe inside build up of cash surrender valueof the life insurance contract must meetspecific internal revenue code requirementsdirected to life insurance contracts. Inaddition, assets supporting the variable life insurance contract must meetrequirements for asset diversificationcontained in the portfolio, and there must be lack of investor control by thepolicyholder over the purchase and sale of the individual investment holdings in the separate account investment portfolios.

There are other considerations when adding life insurance coverage to a captive.Important disciplines to assist in thisendeavor are an experienced life actuary,captive manager, investment manager andtax consultant.

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Benefits of Life Insurancein a Captive (continued)

Congratulations to captiveslicensed in 2012

Millbrook NMF Risk Retention Group

Bridges Insruance Company, Inc.

OrthoForum Insurance Company (A Risk Retention Group)

Orthopedic Physicians Insurance Company

Old PICL Insurance Co.

PICL Insurance Co.

Bison Insurance Company Limited

NorthSouth Insurance Company Limited


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13th Annual ExecutiveEducational Conference

September 17-19, 2012Charleston Place Hotel

South Carolina: Made for CaptivesSCCIA General Information

Welcome to the Next Generation of the SCCIA as we host the 13th Annual ExecutiveEducational Conference September 17-19, 2012 at the Charleston Place Hotel, Charleston, SC.This year’s conference continues the long tradition of enriching the knowledge of captive andalternative risk transfer professionals by presenting a cutting edge educational program.

The Conference also offers the opportunity to network with like-minded industry professionals.Networking breaks, a hosted lunch, the golf tournament and other social events during theconference give you ample time to interact with your fellow professionals.

Whether you are a seasoned veteran, new to the industry, a captive owner, a Risk RetentionGroup member, a captive Director, a service provider, or a risk management professional you will gain from attending the conference.

Conference Activities

4th Annual SCCIA Golf Tournament

SCCIA will host a golf tournament with on Monday, September 17, 2012 ~ Patriots Point Links ~ 8:00 AMWith four sets of tees ranging from 5100 to 7000 yards, players of all skill levels will enjoy this Willard Byrd designed links course on the Charleston Harbor.

A South Carolina tradition since 1979, guests will enjoy great service, and the perennially awarded “Best Par-3 in the Lowcountry” 17th hole, an island green poised in the Charleston Harbor with sweeping vistas of Fort Sumter, Shem Creek and the historic downtown skyline. This is a golf hole that will not be forgotten. The ever-changing wind that typically sweeps across the harbor can make the course play take on a completely different perspective from one round to the next. This links style par 72 championship course was also rated “South Carolina Course of the Year for 2001” by the National Golf Course Owners Association.


Conference Activities

Welcome to Charleston

Cobblestone, sand & water provide endlessopportunities.Famous golf courses, top-rated tennis courts, pristine beaches,monumental battleships and beautifully preserved architecture barelyscratches the surface of attractions in Charleston. You can be as

adventurous or as tame as you like. Best of all, our mild climate means you can enjoymost of our sights year-round.

You may want to consider bringing extra film.Stand on the site of the first shot in the Civil War. Come face to face with a giant seaturtle. Take a tour of an antebellum mansion. Climb aboard a WWII aircraft carrier. Thereare so many blossoming gardens, so many photo opportunities and so many reasons tocome back to see us again.

Getting there is half the fun.There seems to be no better way to see all the sites in the Charlestonthan to embark on one of the many sightseeing tours. Whether byland or sea, Charleston offers plenty of special interest tours to learnall of the rich history of the area. Whether you prefer to stroll downquaint alleyways by foot or trot through the streets in a carriages, allpaths lead visitors on an unforgettable journey back in time. You’ll beentertained and enlightened by knowledgeable guides giving tours onfoot, by carriage, by van—even by boat!

You found the perfect piece a dozen times.Delightfully different shopping is one of the most often mentioned reasons for visiting theCharleston area. You'll find indigenous local crafts, unique specialty shops, and antiquesgalore—plus, a wide variety of high-end retailers.

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DONATE

NOW

As part of the SCCIA’s legislative efforts movingforward, CIPAC (CaptiveInsurance Political ActionCommittee) was formed in order to be collectivelyrepresented as an industryas it relates to legislativematters.

For more informationand Pledge Form go to our website www.sccia.org or contact the Association Office at 1-855-CAPTIVE.

Donate online atwww.sccia.org.

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13th Annual ExecutiveEducational Conference (continued)


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Executive Educational Conference Schedule

Monday, September 17, 2012

8:30 a.m. Conference Golf Tournament ............Patriot Points Links8:00 a.m. - 4:00 p.m. Captive Academy12:00 noon Registration4:30 p.m. SCCIA Annual Membership Meeting5:00 - 6:30 p.m. Welcome Reception

Tuesday, September 18, 2012

7:15 - 8:00 a.m. Networking Breakfast8:00 - 8:30 a.m. Welcome Remarks ..............................SC Governor, Invited8:30 - 9:30 a.m. Insurance Cycle ..................................Speakers TBD9:30 - 10:30 a.m. Getting It Done: Employee Benefits (International and US Domestic)

Mitch Cole, Towers Watson;Stacy Apter, The Coca-Cola Co.

10:30 - 10:45 a.m. Morning Networking Break10:45 - 11:45 a.m. Interactive “Rating” Committee..........AM Best Analysts11:45 a.m. - 1:30 p.m. Luncheon & Keynote Presentation, Dr. Patrick Hickey

Climbing Your Own Everest: The Seven Summits of Your Life1:30 - 2:30 p.m. Fixed Income in a New World ............Jeffrey Rosenberg, BlackRock2:30 - 2:45 p.m. Afternoon Networking Break2:45 - 3:45 p.m. BREAKOUT SESSIONS

Healthcare Reform Impact for Captives: Opportunities forMarketing & the Liability for Healthcare Organizations

Jim Saxton, Stevens & LeeThe New Normal: What It Means for Collateral Requirements?

Caroline Cruickshank, BNY Mellon3:45 - 4:00 p.m. Afternoon Networking Break4:00 - 5:00 p.m. BREAKOUT SESSIONS

Update on RRGs / NAICLeslie Jones, SC DOI; Julie Robertson, Honigman;Tom Brumgardt, Nelson Mullins

Trends in Captive Industry / Captive Strategic ReviewCharlie Woodman, Willis

5:00 - 6:30 p.m. Networking Reception


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Wednesday, September 19, 2012

7:15 - 8:00 a.m. Networking Breakfast8:00 - 9:00 a.m. Advanced Tax / Dodd Frank Act

Dan Kusaila, Saslow Lufkin & BuggyTom Jones, McDermott Will & EmerySarah Stubbs, Johnson Lambert & Co.

9:00 - 10:00 a.m. Evolution of Board Governance Best PracticesTom Brumgardt, Nelson Mullins & Barry Couch, Healthsure

10:00 - 10:15 a.m. Morning Networking Break10:15 - 11:15 a.m. Loss Portfolio Transfers / Novation / Commutation Agreements

Josh Bartlow, Johnson Lambert & Co.11:15 a.m. - 12:00 p.m. Pure Captive / SPFC / RRG / Service Provider Roundtables12:00 noon Conference Concludes

LOG ON TO

WWW.SCCIA.ORGTO ACCESS REGISTRATION, SPONSORSHIP INFORMATION,

HOTEL WEBSITE AND MUCH MORE.


Captive Academy

SEPARATE REGISTRATION REQUIRED

Applying for 7½ hours of ContinuingEducation Credits (CLE, CPE, DOI, ICCIE)

This is an all day course which will start at 8 am with networking and introductions with breakfastrefreshments. The faculty is comprised of 7 active South Carolina providers who will be instructingthe attendees on their specialty. The faculty has combined insurance and Captive formationsexperience of more than 180 years. We will have a working lunch (provided in the registration fee)and end the session promptly at 4 pm. The President of the SCCIA and the Director of Insurancefor the State of South Carolina will be at the closing to award Certificates of Completion.

The course will cover how a captive is formed from the feasibility study, the role the actuary, CPA,bank, captive manager, legal counsel, and investment adviser plays in the formation and the dailyoperation of a captive and why they are so important to the State of South Carolina.

FACULTY

Ron Krebs, License Coordinator, ARTS South Carolina DOIThomas Anderson, Senior Vice President, Wells Fargo BankLinda Danna, Senior Vice President, Account Executive, Marsh Management ServicesF. Ronald Dennis, International Financial Advisor, Dennis Johnson Folline King GroupLegare Gresham, Consulting Actuary, Bartlett Actuarial ServicesDaniel Kusaila, Tax Partner, Saslow Lufkin & BuggyJohn P. Seibels, Jr. (Jay), Founder and Managing Partner, Seibels Law Firm

TENTATIVE AGENDA Riviera Theatre

8:00 - 8:30 a.m. Welcome & Introductions8:30 - 9:30 a.m. Captive Manager Role from Conception, Feasibility Study, Initial

Meeting, Proformas to the Application Process, Licensure and Daily Operation

9:30 - 9:40 a.m. Break9:40 - 10:40 a.m. Actuary Role - from How and Why to Interfacing, Daily Workings,

to Best and Worst Scenario To Working with Outside Reviewer of Submission to Opine to DOI

10:40 - 11:40 a.m. Legal Role with Emphasis on Director / Officer Responsibilities and Duties

11:40 - 11:50 a.m. Break11:50 a.m. - 1:30 p.m. Working Lunch (provided) with CPA, Tax, and Audit Roles1:30 - 2:30 p.m. Investment Role, What To and What Not To Do, Statutory

Requirements & Guidelines2:30 - 2:40 p.m. Break2:40 - 3:10 p.m. Bank Roles & Services3:10 - 3:40 p.m. Regulatory Role3:40 - 4:00 p.m. Conclusion / Certificate Presentation

LOCATION:Charleston Place Hotel$259 / night /www.charlestonplacehotel.com1-800-831-3490 / mention SCCIA

COST:SCCIA / SCACPA MEMBER $250 NON-MEMBER $300

TO REGISTER: SCCIA Members and All Non-Members, go to www.sccia.org

SCACPA Members, go towww.scacpa.org

Questions, please call 1-855-CAPTIVE (855.227.8483).

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SCCIA Featured Speaker


In The Seven Summits of Life, PatrickHickey says we all have the potentialto do anything we want to do. Basing his presentation on hisexperience as the first nurse to climb the Seven Summits of theWorld, he emphasizes that thosehaving reached the top have aresponsibility to encourage others to tap into their potential so thatthey too may reach the top in their lives and their careers.

Biography:

There are only 120 people in the worldwho have climbed the seven summits ofthe world. And, only one nurse, PatrickHickey. A 32-year veteran healthcareprofessional, he not only overcame hispersonal challenge to climb the world’shighest peaks, he did it to inspire otherhealthcare professionals to overcometheir challenges and achieve their highestgoals in their line of work.

“When I climbed the seven summits, Ifaced a lot of the same challenges thatmedical professionals face every daysuch as working in risky environmentsthat require split-second decisions andteamwork. I learned quickly how tomanage these challenges to achieve agoal and desired outcome.”

Hickey has written 7 Summits: A Nurse’sQuest to Conquer Mountaineering and Lifeto tell how hard work, persistence, beliefin self, and the support of family andfriends can help anyone reach the top of the world. A motivational speaker, heparallels his experience with the broaderperspectives of goal setting, dedication,

and the pursuit of challenge in the face of extreme adversity. In his interactivepresentation, “7 Summits of Life,” Hickey tells the dramatic story about hisrecord-breaking quest that led The NewYork Times to call him “a cross betweenFlorence Nightingale and Indiana Jones.”Motivated by his passion for nursing, he hopes to raise awareness of thechallenges facing modern healthcarewhile empowering other medicalprofessionals with his seven point takeaway message for success. Audiencemembers will be able to put these seven principles to immediate use in their careers.

Hickey donates his honorariums from all engagements to the Summit NursingScholarship he has established at the USC College of Nursing.

Dr. Patrick Hickey

Climbing Your Own Everest: The Seven Summits of Your Life

Dr. Patrick Hickey

“In The Seven Summits of Life,

Patrick Hickey says we all have the potential to do anything we want to do.”

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SCCIA Educational Sessions

The Insurance CycleA panel discussion on where we are in the insurance cycle along with forecasts.David Langman, Swiss ReJames Mounty, Miller InsuranceRobert Reader, Guy Carpenter & Company, LLC

Getting It Done: Employee Benefits (International and US Domestic)Join these leading captive insurance experts as they provide insights on how domestic and international employeebenefits can be placed into a captive. This seminar will also focus on best practices related to employee benefitscoverage and next steps after approval.Mitch Cole, Towers WatsonStacy Apter, The Coca-Cola Company

Interactive “Rating” Committee, A.M. Best CompanySteven Chirico, A.M. Best CompanyNick Dranchak, A.M. Best CompanyFred Eslami, A.M. Best CompanyJanet Hernandez, A.M. Best Company

Fixed Income in a New WorldUnprecedented policy intervention by global central banks, deleveraging in the private sector and continued fiscalchallenges for the public sector the world over means the investment environment for fixed income hasfundamentally changed relative to that prevailing during the previous 30 years. So too then should our investment strategies. We’ll review both this “New World” for Fixed Income investing and “What to do with insurance company money.”Jeffrey Rosenberg, BlackRock

Healthcare Reform Impact on Captives: Marketing Opportunities & the Liability for Healthcare OrganizationsIn today’s healthcare environment the demonstrable ability to achieve clinical quality and safety benchmarks and implement performance measures is critical for both risk reduction and economics. Providers must be prepared to demonstrate to patients and payors alike that they are ahead of the curve on quality and safety performance as well as enhancing the “patient experience.” A strong professional liability insurance program may be well positioned to create just the platform your doctors need. This talk will review the link between opportunities for increased reimbursement – such as ACOs, shared savings programs, and bundling initiatives – and the capability to achieve high quality, high value, highly effective care. The ability to help providers identify, develop and implement these key success strategies will be an important value-added for potential insureds, and an important marketing strategy for professional liability programs. Why liability carriers? Because there are liability concerns as well! Let’s discuss preparing our doctors and hospitals for new delivery systems!Jim Saxton, Stevens & Lee

Trends in Captive Industry/Captive Strategic ReviewIn this interactive session we will explore two questions that all captive insurance owners eventually ask:

SCCIA Educational Sessions


(Continued)

1) Is our captive relevant to our needs, and 2) What are current uses and programenhancements that we should consider? We will offer various strategies being employedand discuss the potential issues. Areas may include employee programs, deferredcompensation, emerging premiumbased taxation issues, segregated cell usage (especiallyin single-parent entities), high severity/ low frequency exposure underwriting and the‘small insurer’ programs.Charlie Woodman,Willis

Evolution of Board Governance Best PracticesOur goal is to help you assess the current status of your captive and more importantly,chart a path for continued and even greater success.Tom Brumgardt, Nelson MullinsBarry Couch, Healthsure

The New Normal: What It Means for Collateral Requirements?Carolina Cruickshank, BNY Mellon

Advanced Tax/Dodd Frank ActA basic understanding of insurance taxation is a prerequisite for this seminar. This sessionwill cover the timely and relevant advanced taxation topics affecting the captive insuranceindustry today. Topics covered will include a review of recent IRS rulings, court cases,letter rulings and other guidance that address various captive insurance taxation matters.The panel will also provide an update on the recently enacted Dodd-Frank Act and howthe law affects captives, insight to how companies are handling the law, and what thefuture might hold.Dan Kusaila, Saslow Lufkin & BuggyTom Jones, McDermott Will & EmerySarah Stubbs, Johnson Lambert & Co.

Update on RRGs/NAICTom Brumgardt, Nelson MullinsLeslie Jones, SC DOIJulie Robertson, Honigman

Loss Portfolio Transfers/Novation/Commutation AgreementsThis session will provide an understanding of the three popular methods for transferringrisk including differences in the legal and accounting implications. We will also considerthe impact such transactions have on premium taxes. This session with be interestingfor both service providers and owners as it will touch upon developing new businesspossibilities for captives and RRG’s by moving historically commercially insured lines ofbusiness into ART Programs.Josh Bartlow, Johnson Lambert & Co.

Pure Captive/SPFC/RRG/Service Provider RoundtablesThese interactive roundtable sessions will be grouped accordingly, with a moderator to facilitate discussion among the members present. These have proven to be a usefultool for those in these different segments to network and discuss issues vital to thespecific captive.

HotelAccommodationsThe Charleston Place HotelPositioned at the very heart ofCharleston, within walking distance ofthe historic centre and all the majorattractions, this delightful hotel makesevery guest feel part of this greatsouthern city. A gathering point forlocal society, it blends gentility and old-world charm with a leading-edgespa and innovative cuisine.

Renowned as Charleston’s finest hotel,it is a standard bearer of Orient-Express style. Its first class meetingand conference facilities arecomplemented by ‘The Club’, a private concierge level located on the top two floors. Leisure activitiesinclude relaxing by the rooftop pool,dining in the award-winning CharlestonGrill and browsing the exclusiveboutiques both at the hotel and in the shopping streets nearby.

SCCIA has reserved a specialconference rate of $259/night plus tax.To reserve your room, please call1-800-831-3490 by August 17,2012 or via email [email protected] note, the hotel sells out of roomevery year, so register before theAugust 17, 2012 deadline to stay at thehotel. Visit www.charlestonplace.comfor more information on the hotel.

Topics covered will include a review of recent IRS rulings, c The panel will also provide an u

D

Johnson Lambert & Co.

These have proven to be a useful tool for those in these different segments to network and discuss issues vital to the s

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SCCIA 13th Annual Executive Educational ConferenceSouth Carolina…Made for Captives

Please complete or attach business card.

Name Mr. / Mrs. / Ms.

Organization

Title

Address

City/State/Zip

Phone E-mail*

Name as it should appear on nametag

Spouse/Guest Registration

Please note emergency contact name/number

Registration fee includes conference materials and all events. Pre-conference event, Captive Academy, requires an additional

registration as noted below. Please complete this form by circling your registration type and completing the information below. All registrations must be submitted to SCCIA, PO Box 1763, Columbia, SC 29202 or via fax 803.252.0589.

Payment Method:

Check Enclosed VISA MasterCard American Express Discover

Card Number Exp CVV

Name of cardholder

Signature Cancellation Policy: Written cancellations received on or before August 13, 2011, will receive a refund of 50%. Sorry, but due to hotel staffing requirements, all cancellations received after August 13, 2011, are not eligible for a refund; however substitutions are permitted. Those registering after August 13, 2011 are not eligible for a refund.

Super Early Bird Prior to April 20

Early Bird April 20 - June 30

Regular July 1 - Sept. 12

Onsite

Captive Academy Member $250 $295 $395 $495

Captive Academy Nonmember $350 $395 $495 $595

Member $450 $595 $795 $895

Member Additional $395 $425 $495 $595

Non-Member $750 $795 $995 $1195

Government Rate $225 $225 $225 $225

Spouse / Guest $225 $225 $225 $225

Full Conference Rates

Please complete or attach business card.

Name Mr. / Mrs. / Ms.

Organization

Title

Address

City/State/Zip

Phone E-mail*

Name as it should appear on nametag

Spouse/Guest Registration

Please note emergency contact name/number

Registration fee includes conference materials and all events. Pre-conference event, Captive Academy, requires an additional

registration as noted below. Please complete this form by circling your registration type and completing the information below. All registrations must be submitted to SCCIA, PO Box 1763, Columbia, SC 29202 or via fax 803.252.0589.

Payment Method:

Check Enclosed VISA MasterCard American Express Discover

Card Number Exp CVV

Name of cardholder

Signature Cancellation Policy: Written cancellations received on or before August 17, 2012, will receive a refund of 50%. Sorry, but due to hotel staffing requirements, all cancellations received after August 17, 2012, are not eligible for a refund; however substitutions are permitted. Those registering after August 17, 2012 are not eligible for a refund.

Super Early Bird Prior to March 31

Early Bird April 1 - June 15

Regular June 16 - Sept. 14

Onsite

Captive Academy Member $225 $225 $250 $250

Captive Academy Nonmember $275 $275 $300 $500

Member $450 $595 $795 $895

Member Additional $395 $425 $495 $595

Non-Member $750 $795 $995 $1195

Government Rate $225 $225 $225 $225

Spouse / Guest $225 $225 $225 $225

Full Conference Rates

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