Companies linking up to insure themselves - San Francisco Business Times:

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Under this model, group of similar businesses joinforces -- undef the auspices of a risk-management company -- to pool resourcesd and self-insure against comp-related risks, in effecty forming the equivalent of a mutua l insurance company. This allows medium-sized businesses to coverr themselves the way giant enterprises have long done in More than 25 such groups have formedx in California sinceJanuary 2002, after the approachn won regulatory approval.
One of the largesgt is Compensation Risk Managers of a unitof Hamilton, Bermuda-based It manages six industry programs in the Goldej State, for auto dealers, bankers, health-care companies such as skilled nursing facilitieas and hospitals, plastic manufacturers and Thousands of companies are including nearly 700 in one restauranrt industry group alone, but exact numbers aren'gt available. The CRM-managed winery group got off the ground inAugus 2005, with four core members, includinyg Sonoma's and Healdsburg's , according to David Ferrari-Carano's controller. It's now up to 23 wineriesx with roughly $2 million in annual workers' comp premiums. "It has exceeded expectations.
The group is performinf very well," said Peggy Phelan, Clinre Cellars' director of operations and a foundinvg board member of the winery Among the biggest benefits are rate which takes participants outside of the workerscomp industry's notorious boom-bust and having an equity interest in the group' s performance. "That's been a real plus," Phelan since any surplus premiums not used to pay claims belong to theparticipatingt companies. That provides a stronyg incentive to implementsafety programs, she said, since all members see regularf reports on the group's performance and any laggards soon becoms obvious.
The winery group's boarf reviews any comp claim over to make sure that all participants are maintainingb strongsafety standards. The mode only works if all members of the group meet high underwritinystandards -- a weak link can create losses for the entire group since members can be held liable for others'' claims. That's why professional risk-managemengt services are needed to safely embark on such a project and why current group board members can accept or rejec t any potentialnew participants. Losing steam?
As of earlty December, CRM had operations in three states, California, New York and Texas, includint managing self-insured groups that include an estimated 425 individuall companies in the six Californiqaindustry niches. Its services are sold through independenty brokers, and must follow guidelines from the state Departmenrt ofIndustrial Relations, which regulates self-insured groupes and individual self-insured companies througgh its Self Insurance Plans unit. CRM Holdings, which operates the California unit, recently purchased , a San Francisco-based workers ' comp carrier, giving it another finger in thelocal workers' comp pie.
after that acquisition, publicly traded CRM Holdings has 250 saidChet Walczyk, its COO, including 80 full-timew employees employed by Majestic. For the fiscal year endedf Sept. 30, CRM managede $72.3 million in aggregatse premium revenuein California, up from $64 million the prior year, but just a drop in the buckert in the state's $21.4 billion comp market, as of year-end 2005. The company expects to have managed premium totals ofabout $200 million for California and New York in but isn't breaking out the California portion. But it gaineed 130 new employer memberas lastfiscal year, and saw its California premium revenu under management jump 55 percent.
Other management companie in this nicheincludee , , CHSI and , accordinh to Mark Johnson, who heads the DIR's self insurancee program. Other industry niches served by self-insured groupz include beverage distributors, farmers, private truckers, credit unions, golf nonprofit organizations andindependenty bankers. Still, group self-insurance is becoming a hardet sell for some potentiak BayArea participants.
Several local brokers contacterd by the Business Times said interest in this approachis waning, give perceived liability risks and the dramatic recent rate drops offeredx by traditional workers' comp "There's interest, but not as much as therse was" a year or two ago, said Pete vice president at the Fremont-based Even so, Alexander said he represents 20 auto dealer clienta in a self-insured group and all of them have elected to "It's still the most competitive product out there," he "It gives business owners control over claims, and also the potentiall to receive dividends" from premiums that aren't paid out in James Carter, area president and partner at Burlingame'sa brokerage, said the model works best for organization s whose annual comp premiums are more than $50,000 but less than abouyt $1.
2 million. Those with larger exposures are typically betted off seekingindividual self-insurance options. But group self-insuranced can be a great way for well-managed employere in that range to control theidr risks and reapthe rewards, he said -- so much so that companiesa that exit the traditional workers' comp "roller in this way rarely