Private brand group prepares to become 'captive' insurance company
The Private Brand Tire Group (PBTG) is on its way to becoming a new kind of "captive" insurance company -- one in which each tire brand or distributor network is protected from exposure to the losses of others.
Several members of the PBTG board of directors who attended the organization's meeting in
Clearwater, Fla., on June 27 endorsed the efforts of Executive Director Don Dominguez to form a captive insurance company.
The members' endorsement was in response to a presentation by Dick Goff, president of MIMS International Ltd. of Baltimore, Md. MIMS is expected to function as the program's administrator.
"Potential benefits to our members are considerable, particularly during a period when conventional insurance premiums are high and getting higher," says Dominguez. "But regardless of premium levels in the future, our members will be paying less and benefiting more from their insurance programs."
A captive insurance company is owned by the association, with its members sharing the underwriting risks and rewards. Traditional insurance companies normally participate as the program's "front" underwriter and reinsurer, providing stop-loss protection.
In the case of PBTG, "a major United States insurer" will be the program's underwriting partner. Dominguez says the identity of the insurer will be announced at a later date.
The PBTG insurance program will be open to members of PBTG and to each member's distribution and sales network, potentially numbering among thousands of businesses. Participants may establish their own "protected cells" within the captive insurance company so
that they will be insulated from any losses by others.
The state of South Carolina has been identified as the domicile for PBTG's captive. Recent
legislation there enabled the formation of the protected-cell design for captive insurance companies on which the PBTG program is based.
Proposed coverages of the PBTG program includes:
* general liability.
* automobile liability.
* physical damage.
* workers compensation.
* pollution liability.
* political risks.
According to Dominguez, employee benefits would be included as well if Congress approves pending association health plan legislation.
Each PBTG member company and its affiliated companies can participate at levels that are appropriate to their size and risk exposure.
"This is not like a group program where the losses of a few members can affect the costs and possible underwriting profits for everybody," says Dominguez.
"When a PBTG member forms its protected cell within the company, that cell can be visualized as a silo that has firewalls that protect it from any other events affecting the company. In effect, each protected cell is a mini-insurance company.
"Supported by a proactive pre- and post-loss risk management program, this should bring the cost of insurance down for each participating PBTG member, and also provide them the opportunity to share in underwriting profits."
Members of PBTG will be accepted into the program based on their meeting standards that will serve to reduce their exposure to risk. These standards will include management of human resource functions, customer relations, vendor relations and other areas where risks may occur.
"The bottom line result of this program will be to help members become better managed companies while also cutting expenses and providing the
opportunity to participate in underwriting profits," says Dominguez.