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Captive insurers help fill niche needs


ORLANDO, Fla. — Captive insurers can offer companies more options when it comes to building an insurance program, from allowing greater control over coverages to addressing an issue neglected by the marketplace, a panel of industry executives said at the Captive Insurance Companies Association's international conference in Orlando, Florida.

“For our group, it was a solution to a problem,” said Colin Donovan, vice president for Arlington Heights, Illinois-based Stico Mutual Insurance Co., which provides cover for underground storage tanks.

Pollution coverage was hard to procure in the 1980s, said Mr. Donovan, so forming a captive allowed those in need to get it.

“This is a way to buy pollution coverage — we started an association captive,” said Mr. Donovan. “For us, it was a way to provide coverage to our members.”

A captive can help bring structure to self-insured policyholders.

“I think a captive, in whatever form you do it, puts rigor around a lot of self-insurance,” said Brad Schock, Cleveland-based vice president and director of tax for National General Insurance Co.

Such an arrangement may also yield benefits such as tax advantages, he said.

“There are numerous benefits to captives,” including addressing issues of capacity and availability in the insurance marketplace, said Anne Marie Towle, vice president and senior captive consultant for Willis North America Inc. in Chicago.

The feasibility study phase of forming a captive will be crucial to its success, the panelists said.

“As a regulator, it really sets out the viability of the captive,” said Sandy Bigglestone, Montpelier, Vermont-based director of captive insurance for the state of Vermont.

The feasibility process can also bring together the necessary personnel from a company.

“The key is the buy-in from everybody within the management of your organization,” Ms. Towle said.

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