Employee Benefits and Captive Insurer
As things change in pension land with respect to rules, regulations and funding issues, industry participants are getting creative about risk management. In September 2006, the Insurance Information Institute (III) wrote, "An increasing number of corporations are using captives to fund their employee benefits programs." One type of Alternative Risk Transfer (ART) mechanism, captives are a response to keeping a lid on commercial insurance costs. (For a primer on captives, visit Captive.com, a self-described "Business-to-Business Risk and Insurance Exchange.")
One wonders if this trend portends an increased emphasis on enterprise risk management (ERM) and, by extension, a strategic focus on benefits as an integral part of a corporation's assets and liabilities. According to a recent overview of ERM by Towers Perrin, "More than half of respondents - 57% in the U.S. and 72% in the U.K. - believe their company's pension related risk is significant relative to other financial and operational risks."
Reprinted with permission from the Association for Financial Professionals (AFP), the article below highlights one company's experience.
"The Latest to Place Employee Benefits Risk with Captive" by Kraig Conrad, CTP, September 27, 2006
<< The H.J. Heinz Co. earlier this month became the latest company to receive US Department of Labor (DOL) approval to cover employee benefits risks through their captive insurance company.
In the slowly growing trend to take advantage of program costs-savings with captives, the Pittsburgh-based company became the tenth company to receive DOL approval. DOL established EXPRO, or the standardized and expedited procedure, six years ago in order to grant advance approval of certain types of standard transactions-such as the use of captives to fund certain employee benefits- effectively removing roadblocks that prevented such transactions.
Heinz will use Heinz-Noble Inc., its Vermont captive, to reinsure employee and retiree group term life insurance policies, according to Business Insurance. Their Vermont-based captive is also used to cover a variety of property and casualty risks for the company.
In addition to group life insurance, the other nine companies with DOL approval have covered long-term disability and accidental death and dismemberment policies through their company's captive.
As a licensed insurance carrier a captive is under the control of its parent corporation with the primary purpose of insuring or reinsuring portions of the entire risk exposures of the parent and related companies. Though risks covered by captives typically have been related to property and casualty and workers' compensation, companies are looking to place other risks with their captives to help reduce risk management costs. >>
Copyright @ 2006 Association for Financial Professionals. All Rights Reserved.
One wonders if this trend portends an increased emphasis on enterprise risk management (ERM) and, by extension, a strategic focus on benefits as an integral part of a corporation's assets and liabilities. According to a recent overview of ERM by Towers Perrin, "More than half of respondents - 57% in the U.S. and 72% in the U.K. - believe their company's pension related risk is significant relative to other financial and operational risks."
Reprinted with permission from the Association for Financial Professionals (AFP), the article below highlights one company's experience.
"The Latest to Place Employee Benefits Risk with Captive" by Kraig Conrad, CTP, September 27, 2006
<< The H.J. Heinz Co. earlier this month became the latest company to receive US Department of Labor (DOL) approval to cover employee benefits risks through their captive insurance company.
In the slowly growing trend to take advantage of program costs-savings with captives, the Pittsburgh-based company became the tenth company to receive DOL approval. DOL established EXPRO, or the standardized and expedited procedure, six years ago in order to grant advance approval of certain types of standard transactions-such as the use of captives to fund certain employee benefits- effectively removing roadblocks that prevented such transactions.
Heinz will use Heinz-Noble Inc., its Vermont captive, to reinsure employee and retiree group term life insurance policies, according to Business Insurance. Their Vermont-based captive is also used to cover a variety of property and casualty risks for the company.
In addition to group life insurance, the other nine companies with DOL approval have covered long-term disability and accidental death and dismemberment policies through their company's captive.
As a licensed insurance carrier a captive is under the control of its parent corporation with the primary purpose of insuring or reinsuring portions of the entire risk exposures of the parent and related companies. Though risks covered by captives typically have been related to property and casualty and workers' compensation, companies are looking to place other risks with their captives to help reduce risk management costs. >>
Copyright @ 2006 Association for Financial Professionals. All Rights Reserved.
