Magazine article Risk Management

Solutions for Agricultural Co-Ops

Magazine article Risk Management

Solutions for Agricultural Co-Ops

Article excerpt

Agricultural co-ops, which can include farm supply co-ops, fertilizer manufacturers, and grower co-ops, all share certain differences in tax structure that set them apart from other corporations. "Agricultural co-ops work within some very tight margins and have different tax structures," according to Roger Oaks, vice president at Johnson & Higgins of Tennessee in Nashville. Because agricultural co-ops are often small, they look for ways to share risk and improve purchasing power. One way to do this is to group together and form a captive. Mr. Oaks, who set up a successful association captive while in his former job with an agricultural co-op, noted that often environmental risk is insured. "The pollution needs of agricultural co-ops are different from other corporations.

Often seeking commercial insurance is expensive because of the cost of requisite site inspections. Many coops have a number of locations, so utilizing a captive can save money," said Mr. Oaks. Most co-ops already know what their environmental situation is and do not need the inspection, he added. Other advantages of captives include "a reduced cost of administration, direct access to reinsurance and the ability to design your own policies, which in today's market is saying a lot. You can cover things that you can't buy traditionally," he said. In addition, captives allow you to stabilize premium from year to year, and in soft market years to pool the money. "Companies don't have to ride the roller coaster so high and low," Mr. …

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