Coca-Cola Jumps on the Captive Bandwagon

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One of the world’s largest beverage companies has successfully embraced the somewhat modern practice of funding employee benefits through captive utilization.

Coca-Cola recently began reinsuring some of its international pension liabilities through its Dublin-based captive, Coca-Cola Reinsurance Services Ltd. The captive reinsures about 0 million in annuities written by insurers for benefits provided to enrollees in three Coca-Cola pension plans in the United Kingdom and Ireland.

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After years of operating their own captive, Coca-Cola Reinsurance Services Ltd.

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, to fund a portion of their employee benefits, the beverage giant will now cover international benefit liabilities through a captive.

Coca-Cola had been handling “quite significant” property/casualty risks in its captives for “quite some time,” said Stacy Apter, senior global benefits consultant with Coca-Cola and a panelist at the conference. “Why would we not be taking advantage of the same efficiencies on the employee benefits side when they are more predictable risks?

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”

Apter stated that medical coverage, as an example, is similar to a cash flow operation, in that it is not difficult to predict yearly costs. It seems that employee benefit captives would be a good move most sizable companies, though only a handful have fully embraced it.

A few online resources for learning more about the world of employee benefit captives:

  • Captive.com — “Using Captives for Employee Benefits” covers why employers are using their captive for employee benefits, who has done it so far, how existing transactions have been structured and the primary issues that employers need to evaluate.
  • TowersPerrin.com — “Employee Benefits: Captive Manager’s Key Roles” explores the importance of having the right external partners when choosing a captive and how to ensure appropriate coordination among the internal and external parties involved.
  • Aon.com — “Employee Benefit Captives: Their Role in Managing Enterprise Risk” is a concise reference that can serve as a reference for further examination of the business issues involved in the placement of employee benefits risks in captive insurers.

The Rising Cost of Disasters

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A new report from Allianz analyzes the fact that the insurance claims from natural disaster are becoming more expensive. The key reason is not so much that there are more disasters, just more buildings, more development and more insurance. And as parts of the developing world, specifically China and India, continue to become more affluent, we can likely expect this to continue.

One way this is illustrated is by looking at the most powerful and more deadly earthquakes in each of the past ten years. In some years (2003, 2008 and 2011 so far), the strongest quake is also the most deadly.

But in other years, notably last year with the 8.

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8 magnitude earthquake in Chile killing 507 people and the 7.

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0 earthquake in Haiti killing more than 200,000, that has not been the case. The two main reasons for this is that the stronger quake either hits a very remote location where people don’t live or it hits a location with modern building codes and shake-resistant buildings.

Markus Treml, seismology expert at Allianz SE Reinsurance, explains.

The Energy factor shows the ratio between the seismic energy released by the two earthquakes. For example, the quake in Chile released 500 times more energy than the quake in Haiti. This table shows that those regions where tectonic plates clash are at highest risk. Six tremendous earthquakes happened in Indonesia in the last decade. All other earthquakes in this table – except Haiti – are also in high-risk zones. The amount of energy released does not necessarily mean more damage or casualties. Instead, weak buildings or secondary effects of earthquakes such as tsunamis or fires are the most common reason for high fatality rates.

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This was the case in Haiti in 2010, in Northern Sumatra in 2004 and will probably be the case for Japan.

As he mentions, the “energy factor” in the chart below represents how much more powerful the strongest earthquake was each year than the most deadly.

The Triangle Shirtwaist Fire: 100 Years Later

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100 years ago today, a fire killed 146 factory workers in an event that would be called the deadliest workplace disaster in New York City’s history up until the September 11th terrorist attacks.

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The Triangle Shirtwaist factory fire occurred on March 25, 1911 when a lit cigarette or match (still unclear which) ignited a fire on the 8th floor, which quickly spread to the floors above.

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In all, 146 people died, mostly from jumping to their death from the 8th, 9th or 10th floors of the building as some exits were locked to prevent theft and fire escapes proved broken and useless. Through this tragic event, working conditions in the city’s sweatshops improved and garment workers gained support for unionization. The Triangle Shirtwaist fire “was the major impetus that led to developing occupational health and safety measures, fire prevention efforts and the state-based workers compensation system.”

Only months after the horrific fire, the American Society of Safety Engineers was formed and today, its 32,000 members who manage, supervise and consult on safety, health, and environmental issues in industry, insurance, government and education.

It was “watching those women and children, some of them actually holding hands as they jumped from the building from the ninth floor, knowing they were going to die, but preferring not to burn” that led to creation of workplace safety laws, said Mark Oldham, Richmond, Va.-based executive consultant, risk services department, for Allianz S.E.’s Fireman’s Fund Insurance Co.

A number of publications have run pieces remembering the Triangle Shirtwaist factory fire.

Here are a few of the best:

Firefighters battle the blaze at the Triangle Shirtwaist Factory in downtown Manhattan. 146 people, mostly young female immigrants, lost their lives.

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The Top 25 Property/Casualty Insurance Writers

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No, neither Johnathan Franzen nor myself made the list. We’re talking about the companies that wrote the most business in 2010. Here’s the full list of the top 25 U.S. carriers in terms of net premiums written, according to AM Best.

1. State Farm Group—$50,808,635
2. Allstate Insurance Group—$24,796,656
3. Liberty Mutual Insurance Cos.—$21,483,996
4. Berkshire Hathaway Insurance—$21,358,316
5. Travelers Group—$20,594,458
6. American International Group—$19,687,720
7. Nationwide Group—$14,489,531
8. Progressive Insurance Group—$14,476,676
9. Farmers Insurance Group—$14,129,512
10. USAA Group—$10,679,414
11. Hartford Insurance Group—$9,688,760
12. Chubb Group of Insurance Cos.—$8,927,736
13. CNA Insurance Cos.—$6,188,618
14. American Family Insurance Group—$5,324,290
15. Allianz of America—$4,666,301
16. Auto-Owners Insurance Group—$4,485,442
17. Munich-America Holding Corp.—$4,413,834
18. Zurich Financial Services NA Group—$4,400,123
19. Erie Insurance Group—$4,019,273
20. Ace INA Group—$3,705,475
21. Transatlantic Holdings Inc. Group—$3,418,020
22. W.R. Berkley Group—$3,392,330
23. The Hanover Insurance Group Property & Casualty Cos.—$3,053,508
24. MetLife Auto & Home Group—$2,983,236
25. Cincinnati Insurance Cos.—$2,965,462