Magazine article Risk Management

Brokers, Insurers, Launch Risk Programs

Magazine article Risk Management

Brokers, Insurers, Launch Risk Programs

Article excerpt

A new insurance program from Johnson & Higgins allows insureds to stabilize property premiums and coverage for up to 10 years, according to Michael Schiebert, vice president of J&H in San Francisco. "It's a new way of looking at property insurance," he says. "We're incorporating more risk management techniques into the traditional approach of buying insurance." The Risk Incentive Sharing Program allows the insurer and insured to agree on the term of the insurance contract, the amount of retention, premiums and possible discounts for good loss experience, according to Mr. Schiebert. At the start of the program, the insurer and the buyer agree on a premium level based on competitive market rates. The buyer retains a portion of the premium and creates a reserve fund. If claims are greater than the policy deductible, the insurer can recapture a portion of the reserve. Reserve funds can be invested to accumulate interest and, if not recaptured, used to increase the self-insurance. Because of the higher self-insurance levels, insurers do not have to pay small claims, which in turn protects the buyer from premium increases. If the firm has no losses above the self-insured amount during the program, it keeps the funds in the reserve account. Adds Mr. Schiebert, "Either a captive or a J&H rent-acaptive can be used in conjunction with this setup. Contracts for the program are in amounts of $25 million, with annual premiums at approximately $1 million. …

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