Target Markets Program Administrators Assn. (TMPAA) is soliciting program administrators for its Target Markets Insurance Company (TMIC), a protected cell captive alternative risk option for program administrator E&O risk being developed exclusively for its membership and promoted at its tenth annual summit last week in Scottsdale, Ariz.
TMPAA began gauging member interest in a captive early this year and introduced the concept at its midyear meeting in May. Since then, TMPAA has compiled a list of 14 "early adopters" who will assist in building out the program, said Glenn Clark, president of Rockwood Programs Inc., which will be underwriting the captive. Members who join the captive will become members of its board of directors, and each will be asked to serve on the board or a committee, such as claims, underwriting or administration, Clark said.
Spearheading the project is new TMPAA member Breckenridge Insurance Services Inc., which specializes in alternative risk transfer. Other members involved are Milliman Inc., which will handle actuarial services; Ullico Casualty Group Inc., protected captive cell manager; and law firm Wilson Elser, which will oversee defense, claims and risk management services.
Lloyd's of London is the issuing carrier for the program's $3 million in primary limits/$3 million aggregate, with other TMPAA carrier members available to provide excess coverage of up to $10 million. The captive will be domiciled in Washington, D.C. and available for Jan. 1, 2011 renewals. Although price will vary depending on coverage, the initial investment is estimated to range between $50,000 to $150,000, Clark said.
TMPAA founders had always planned to offer members a captive program, Clark said. "We needed a 'champion' to drive the concept from idea to execution, and Breckenridge filled that gap," he added.
Although the standard insurance market is currently awash in low-priced E&O coverage, captives allow participants to assume a portion of their own risk, giving members more control, Clark said. This can result in pricing and coverage stability as well as long-term cost savings over the course of 3 to 5 years, he said. "Because our claims will be handled by Target Markets member Wilson Elser, we also can use loss experience as a teaching tool for our policy holders. If loss performance is better than expected, TMIC will share profits with participants," he said.
The protected cell structure ensures that investors' individual results will remain untouched, with coverage limits based on demand, added Mark W. Hinkley, reinsurance consultant for Breckenridge. "This in some ways is how the insurance business is going-- less being handled by large, monolithic companies and more individual risk management and knowledge of class to improve loss ratios," Hinkley said. "It's a perfect match of companies and entrepreneurs."
The real benefit of the captive is the fact that TMPAA members will be directly involved in its development and operation, said Peter Foley, executive vice president at Breckenridge.
Now that the captive's structure has been fleshed out, interested is beginning to build. The captive committee received several applications at last week's meeting, and TMPAA members will be able to apply online in early November, Foley added. "Most members can find E&O coverage at a reasonable rate, but it won't stay that way forever," he said. "More importantly, here is a chance to participate and build value in your business. We will be very conservative and transparent. The captive is not purely an investment but a way to establish stability and build value in the business."
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