Mid-Size Firms Form Insurance Market 'Captives'
PHOENIX — A hardening insurance market for trucking that has seen premiums rising sharply throughout the year now has developed a new option for providing coverage — group captive companies.
Captive insurance companies that have only one parent are rare in the transportation industry. Accountant and consultant Richard Irvine of KPMG estimated only 11 trucking companies and 12 other transportation firms have them. This is an expensive proposition, available to only the largest of carriers, similar to buying a house.
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Captive insurance companies have been around for years. They are the wholly owned subsidiaries, usually of giant corporations such as United Parcel Service (UPS) or CNF Inc. (CNF), that provide the parent company with insurance coverage mainly for property and casualty risks, especially for vehicles. Workers compensation is sometimes included.
The new wrinkle is the “condominium” approach designed to appeal to carriers of a lesser size. Representatives of insurance broker Marsh USA made the presentation here as a case study at the first joint fall conference of the National Accounting and Finance Council, a part of American Trucking Associations.
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