November 14th - 17th, 1999
Hyatt Regency Miami, Florida

Captive Case Studies

Janet Evans, Corporate Risk Manager, Snow Summit Ski Corp
Barry Port, President, Public Utility Mutual Insurance Co.
Philip Thomas, Dir. of Risk Management, Bass, Burton on Trent
Moderator: D. Hugh Rosenbaum, Principal, Tillinghast-Towers Perrin

Wednesday, November 17, 8:45 - 11:00 a.m.

"Expert: Captives Need to Address New Risks"

Addressing new risks, increasing profits through third-party business and improving loss-prevention practices are some of the growing roles of captive insurers highlighted by risk managers in the final session of the Ninth Annual World Captive and Alternative Risk Financing Forum.

Barry Port, president of Public Utility Mutual Insurance Co., pointed to the role his Vermont-domiciled group captive plays in lowering costs for its members, helping to increase membership and foster customer and employee loyalty.

Public Utility seeks to advance the goals of its sponsor--the Public Utilities Risk Management Association--by providing cost-effective risk funding through "self-insured retention, group purchasing advantages with reinsurance and the development of alternative risk-transfer programs," Port said.

Public Utility was formed in 1997 to help the risk management association's members--New England utilities--address the risk-management issues raised by the prospect of electric-utility deregulation. Deregulation exposes utilities to these new risks by removing their historical monopoly status.

Port said PUMIC has developed a power supply price insurance product to address the risk of "power losses that can cost millions of dollars per day." He said the captive also is looking into providing e-commerce insurance as more of its members engage in Internet billing. It also is considering taking over voluntary and employer benefits in support of PURMA's strategy of supporting employee retention, he said.

Richard Inserra--the assistant treasurer of Union Carbide who also runs the company's captive, Westbridge Insurance Ltd.--held up his company as a captive formed as a vehicle for risk financing but that has grown to become a profit center.

"Only 34% of Westbridge's business is derived from parental risk," Inserra said. "It really stands on its own."

In 1994, 34% of Westbridge's business consisted of what Inserra called "nonrelated business." In 1999, nonrelated business accounted for 66%, he said. Premium revenue has increased from $10.8 million in 1995 to $24.2 million as of Sept. 30, 1999.

In addition, Inserra said, "we've never had an underwriting loss. Whether we've been lucky or good, it shows up on the bottom line."

According to Philip Thomas, director of risk management for Bass, the most important role of a captive is "to drive the risk-management and loss-control agenda."

During his time managing risk for Bass--which he described as a "white-knuckle roller coaster ride" marked by pub fires, North American windstorms, as well earthquakes in Turkey and Taiwan and Hurricane Floyd--Thomas said he has seen opportunities to assess and improve loss-prevention standards and practices in ways that would have been difficult for a third party.

"Risk-taking is brought in house, and losses hit the profit and loss account," Thomas said. "This drives loss-prevention action."