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With the Clinton administration again eying the potential tax revenue from owners of captive insurers that write only a limited amount of third-party business, FMR Corp. is protecting itself.

A new reinsurance pooling arrangement has beefed up its captive's third-party business so much that FMR already meets the more stringent captive premium tax deduction rules the administration has proposed.

But, regardless of whether the proposed third-party business rules are adopted, FMR's pooling arrangement with a half dozen other large companies will help strengthen its captive by reducing claims variability and doing it with minimal frictional costs, according to FMR's risk management officials.

Meanwhile, Boston-based FMR, which is better known as Fidelity Investments, intends to study whether it wants to reinsure employee benefits through its captive.

Like last year's Clinton administration budget proposal, this year's budget plan would require captives to derive at least 50% of their business from third-party risks for their owners to take a tax deduction for the premiums they pay their captives. Currently, captives and their owners are subject to a 30% threshold, which has been established by various courts.

When Fidelity's captive, Bermuda-based Fidvest Ltd., began participating in the new reinsurance pool in January, its third-party business jumped to about 51% from none, according to Judy Lindenmayer, vp-Fidelity insurance and risk management, and Donna M. Manzo, corporate risk manager and a member of Ms. Lindenmayer's staff.

Ms. Manzo spearheaded Fidelity's role in putting together the pooling arrangement, known as the Green Island Reinsurance Pool. The pool is managed by Johnson & Higgins (Bermuda) Ltd.

Besides Fidvest, which is managed by Marsh & McLennan Management Services (Bermuda) Ltd. in Hamilton, six other captives participate in the pool. The owners of those captives include textile, apparel and home furnishings manufacturer Burlington Industries Inc. of Greensboro, N.C.; electrical equipment manufacturer Hubbell Inc. of Orange, Calif.; and Tyson Foods Inc. of Springdale, Ark.

Under the arrangement, each captive cedes the first $100,000 of its primary general liability, automobile liability and workers compensation losses to the pool.

Pool losses are combined and then allocated to pool members. The allocation percentage equals the ratio of a captive's premium to all of the premiums paid into the pool.

A participant's pool losses are limited to two times the premium it has paid.

Losses beyond that are kicked back to the pool participant that incurred them.

A "batch clause" protects participants from a sequence of related events by limiting the number of times those events can trigger coverage.

Each captive's premium, determined by Milliman & Robertson Inc. in Boston and paid in four installments, is equal to its parent company's expected losses during the one-year policy period.

Fidelity now is studying whether it wants Fidvest to write some employee benefits.

Some of the benefits-employee-paid term life and long-term disability insurance-are governed by the Employee Retirement Income Security Act of 1974, which makes them parent-company risks under U.S. Labor Department rulings.

For Fidvest to write the ERISA-governed benefits, though, the captive would have to find other sources of third-party business. The Labor Department precludes employers from using their captive insurers to insure or reinsure ERISA-governed employee benefits unless no more than 50% of the captive's business is derived from the parent company's risks.

Fidelity also would have to move Fidvest onshore or to a U.S. territory to reinsure employee benefits. Labor Department regulations stipulate that captive insurance subsidiaries that insure or reinsure their parents' employee benefits risks must be licensed in at least one U.S. state or territory.

Fidelity still is conducting a cost/benefit analysis on whether reinsuring those benefits with the captive is its best recourse.

Fidelity currently is funding those benefits through a Voluntary Employee Beneficiary Assn., which is a tax-favored trust.

Meanwhile, Fidelity is considering generating additional third-party business through its captive by offering employees homeowners and automobile insurance.

One key concern for Fidelity is whether it could offer the coverage cheaply enough to attract a significant number of employees.

"We're looking at it to give our management the additional facts they need to make an informed decision," Ms. Lindenmayer said. "It may be, when all the analysis is done, there's a reason not to do it."