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November 14th - 17th, 1999
James D. Cameron, Esq., Partner, Baker & McKenzie Monday, November 15th, 3:45-5:00 p.m. "New Ways to Better Use Your Captive"
That business is usually unrelated to the primary business of the corporate owner. For example, a captive could offer coverage to contractors, suppliers and franchisees. The best opportunities for unrelated business come from areas that are a natural extension of a company's business, James D. Cameron, partner, Baker & McKenzie, said Nov. 15 during the Ninth World Captive and Alternative Risk Financing Forum. For example, a credit-card company can provide credit-card insurance cost effectively because it already mails monthly bills to customers. Insurance on cell phones, extended product warrantees and wrap-up insurance for contractors also are logical business extensions that lend themselves to be included in a captive, he said. It is important to price that unrelated business properly, he said, noting that the best gauge is what is being charged in existing markets. Captives also offer a vehicle for covering previously unprotected risks, according to Mitchell J. Cole, principal, Towers Perrin. He cited the example of several ski resorts banding together to cover the risk of a season when not enough snow falls. When determining the best way to expand a captive's business, the corporate owner should consider several factors, Cole said. These include:
Is there a strategy to easily exit the business? |
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New Ways to Better Use Your Captive
As captive insurance companies begin to accumulate assets, their owners often seek ways to increase the business that is funneled to them.