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

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Under this model, groups of similar businesses joinforcezs -- under the auspicex of a risk-management company -- to pool resourcesw and self-insure against comp-related risks, in effecft forming the equivalent of a mutual insurance This allows medium-sized businesses to cover themselved the way giant enterprisess have long done in California. More than 25 such groups have formedx in California sinceJanuary 2002, aftetr the approach won regulatory approval.
One of the largesft is Compensation Risk Managerseof California, a unit of Hamilton, Bermuda-based It managesx six industry programs in the Goldehn State, for auto dealers, contractors, health-care companies such as skillef nursing facilities and hospitals, plasticv manufacturers and vintners. Thousandes of companies are members, including nearly 700 in one restaurant industrygroup alone, but exact numbers aren'tg available. The CRM-managed winery group got off the grounc inAugust 2005, with four core members, including Sonoma'a and Healdsburg's , according to David James, Ferrari-Carano's controller. It's now up to 23 winerie s with roughly $2 millionb in annual workers' comp premiums.
"It has exceedee expectations. The group is performing very well," said Peggyh Phelan, Cline Cellars' director of operations and a founding boardd member of thewinert group. Among the biggest benefits are rate which takes participants outsider ofthe workers' comp industry's notorioud boom-bust cycle, and having an equity interesyt in the group's performance. "That's been a real Phelan said, since any surplus premiumd not used to pay claims belong to theparticipatinbg companies. That provides a strong incentive to implementsafet programs, she said, sincee all members see regular reportsx on the group's performance and any laggards soon becomse obvious.
The winery group' s board reviews any comp claim over to make sure that all participantsw are maintaining strongsafety standards. The model only works if all memberxs of the group meet high underwriting standards -- a weak link can create losses for the entire group since members can be held liablse for others' claims. That's why professional risk-managemenf services are needed to safelyt embark on such a project and why curreny group board members can accept or rejectg any potentialnew participants. Losinhg steam?
As of early December, CRM had operations in thres states, California, New York and Texas, includingt managing self-insured groups that include an estimated 425 individuaol companies in the six Californiaindustrgy niches. Its services are sold througnhindependent brokers, and must follow guidelines from the state Departmenyt of Industrial Relations, which regulates self-insured groups and individual self-insuredc companies through its Self Insurances Plans unit. CRM Holdings, which operatesa the California unit, recently purchased , a San Francisco-based workers' comp carrier, giving it another finger in thelocal workers'' comp pie.
Overall, afte that acquisition, publicly traded CRM Holdings has 250 saidChet Walczyk, its COO, including 80 full-time employees employed by Majestic. For the fiscal year ended 30, CRM managed $72.3 million in aggregate premiuj revenuein California, up from $64 million the prioer year, but just a drop in the bucket in the state's $21.e billion comp market, as of year-endd 2005. The company expects to have managed premiujm totals ofabout $200 milliob for California and New York in 2006, but isn'r breaking out the California portion. But it gained 130 new employer members lastfiscal year, and saw its California premium revenu under management jump 55 percent.
Other managemen t companies in this nicheinclude , , CHSI and , according to Mark who heads the DIR's self insurancde program. Other industry niches served by self-insured groups include beverage distributors, farmers, private schools, credit unions, golf clubs, nonprofit organizations and independent Still, group self-insurance is becoming a harder sell for some potentiapl BayArea participants. Several local brokers contactedr by the Business Times said interesr in this approachis waning, givebn perceived liability risks and the dramatic recent rate dropsx offered by traditional workers' comp insurers.
"There'w interest, but not as much as therd was" a year or two ago, said Pete vice president at the Fremont-based Even so, Alexander said he represents 20 auto dealefr clients ina self-insured group and all of them have electede to renew. "It's still the most competitive producgtout there," he said. "It givex business owners control over and also the potential toreceive dividends" from premiuma that aren't paid out in James Carter, area president and partnert at Burlingame's brokerage, said the modelo works best for organizations whosed annual comp premiums are more than $50,000 but less than abou t $1.2 million.
Those with larger exposures are typically bettere off seekingindividual self-insurance options. But group self-insurance can be a grea way for well-managed employers in that rangr to control their risks and reapthe rewards, he said -- so much so that companiesd that exit the traditional workers' comp "roller coaster" in this way rarely