1997 RISK MANAGER OF THE YEAR: CAPTIVE CUTS COST OF EXCESS SIPC COVER

Judy Lindenmayer uses FMR Corp.'s Bermuda-based captive insurer to dramatically cut the cost of the excess liability insurance that the company buys to further safeguard clients of its stockbroker operations.

The captive, Fidvest Ltd., managed by Marsh & McLennan Management Services (Bermuda) Ltd. in Hamilton, reinsures the company that writes coverage excess of a federal government program that protects stockbrokers' clients.

The reinsurance arrangement has reduced the cost of the excess coverage 35% to 40% for FMR, which is better known as Fidelity Investments, said Ms. Lindenmayer, vp-Fidelity insurance and risk management.

The government's Securities Investor Protection Corp. provides up to $500,000 of protection to every account holder of the nation's stockbrokers in the event a brokerage becomes insolvent and its account holders cannot recover their money.

Although excess coverage is not required, many stockbrokers, including Fidelity's, purchase it as a marketing tool.

Fidelity buys coverage that provides each account holder up to $100 million of protection against losses due to a broker insolvency. Fidelity buys $99.5 million of excess insurance of $500,000 from Asset Guaranty Insurance Co. of New York.

Three years ago, Fidvest began reinsuring Asset Guaranty on a 50% quota-share basis.