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CAPTIVES
But few options available for firms selecting insurers
BONITA SPRINGS, Fla.- Selecting a fronting insurer to issue policies and provide services is an essential component of funding employee benefit risks through captive insurance companies, a panel of experts says.
For regulatory reasons, employer requirements include using a fronting insurer, which typically reinsures all or most of the risk with the employer's captive. Under procedures adopted nearly a decade ago, the Labor Department requires the employer to select an insurer with a rating of least A from A.M. Best Co. Inc. to win its approval of their captive benefit funding applications.
Not only is selection of a fronting insurer a regulatory requirement, it also is practical, says Suzanne Gallie, senior risk manager in the corporate risk management department at Sun Microsystems Inc. in Broomfield, Colo. Speaking last week at the 19th annual World Captive Forum in Bonita Springs, FIa., Ms. Gallie said fronting insurers used for benefit captives perform vital functions such as underwriting, collecting data, and administering and paying claims. Sun uses a Vermont branch...