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

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Under this model, groups of similar businesses joinforcez -- under the auspices of a risk-management company -- to pool resourcews and self-insure against comp-related in effect forming the equivalent of a mutuaol insurance company. This allows medium-sized businesses to cover themselvesx the way giant enterprises have long donein California. More than 25 such groupsa have formed in California sinceJanuargy 2002, after the approach won regulatoryg approval.
One of the largest is Compensation Risk Managersof California, a unit of Bermuda-based It manages six industry programs in the Golden for auto dealers, bankers, health-care companies such as skilled nursinf facilities and hospitals, plastic manufacturers and Thousands of companies are members, including nearly 700 in one restauranty industry group alone, but exact numbers aren't available. The CRM-managed wineru group got off the ground inAugustg 2005, with four core including Sonoma's and Healdsburg's , according to David Ferrari-Carano's controller. It's now up to 23 wineriesx with roughly $2 million in annuao workers' comp premiums. "It has exceedeed expectations.
The group is performing very saidPeggy Phelan, Cline Cellars' directord of operations and a foundinvg board member of the winery Among the biggest benefits are rate stabilization, which takeas participants outside of the workers' comp industry's notorious boom-bust cycle, and having an equity interest in the group' performance. "That's been a real Phelan said, since any surplus premiums not used to pay claimes belong to theparticipating companies. That provides a stronvg incentive to implementsafety programs, she said, since all members see regular reports on the group's performance and any laggards soon becomew obvious.
The winery group's board reviews any comp clainmover $10,000, to make sure that all participants are maintainingh strong safety standards. The model only worksz if all members of the group meet high underwritingbstandards -- a weak link can create losses for the entire group since memberz can be held liable for others' That's why professional risk-management services are needefd to safely embark on such a project and why currenrt group board members can accept or rejecg any potential new participants.
Losing steam As of early December, CRM had operationzs in three states, California, New York and Texas, includingb managing self-insured groups that include an estimated 425 individua companies in the six Californi aindustry niches. Its services are sold througj independent brokers, and must followq guidelines from the state Department ofIndustrial Relations, which regulatess self-insured groups and individual self-insured companies throug its Self Insurance Planw unit. CRM Holdings, which operates the California recentlypurchased , a San Francisco-based workers' comp carrier, giving it another finger in the local workers'' comp pie.
Overall, after that acquisition, publicly tradedf CRM Holdings has250 employees, said Chet its COO, including 80 full-time employees employed by For the fiscal year ended Sept. 30, CRM managed $72.4 million in aggregate premium revenuein California, up from $64 millionm the prior year, but just a drop in the bucket in the state's $21.4 billion comp market, as of year-encd 2005. The company expects to have manageds premium totals ofabout $200 milliomn for California and New York in 2006, but isn't breaking out the California But it gained 130 new employet members last fiscal year, and saw its Californi a premium revenue under management jump 55 Other management companies in this niche includee , , CHSI and , according to Mark Johnson, who heada the DIR's self insurance program.
Othet industry niches served by self-insured groups include beverage distributors, farmers, privated schools, truckers, credit unions, golf clubs, nonprofirt organizations and independent bankers. Still, group self-insurancd is becoming a harder sell for some potentialp BayArea participants. Several local brokers contacted by the Busines s Times said interest in this approachis waning, given perceivedr liability risks and the dramatic receny rate drops offered by traditional workers' comp insurers. "There's interest, but not as much as ther was" a year or two ago, said Pete vice president at the Fremont-based brokerage.
Even so, Alexandef said he represents 20 auto dealed clients ina self-insured groul and all of them have elected to "It's still the most competitive productg out there," he "It gives business owners control over and also the potential to receivde dividends" from premiums that aren't paid out in James Carter, area president and partner at Burlingame's brokerage, said the modell works best for organizations whoses annual comp premiums are more than $50,000 but less than abouft $1.2 million. Those with larger exposures are typically bettefr off seekingindividual self-insurance options.
But group self-insurance can be a grear way for well-managed employers in that rangse to control their risks and reap the hesaid -- so much so that companies that exit the traditionap workers' comp "roller coaster" in this way rarel return.