Target Markets Program Administrators Assn. (TMPAA) is soliciting programadministrators for its Target Markets Insurance Company(TMIC), a protected cell captivealternative risk option for program administrator E&Orisk being developed exclusively for its membership andpromoted at its tenth annual summit last week in Scottsdale,Ariz.

TMPAA began gauging member interest in a captive earlythis year and introduced the concept at its midyear meeting in May.Since then, TMPAA has compiled a list of 14 "early adopters" whowill assist in building out the program, said Glenn Clark,president of Rockwood Programs Inc.,which will be underwriting the captive. Members who join thecaptive will become members of its board of directors, and eachwill be asked to serve on the board or a committee, such as claims,underwriting or administration, Clark said.

Spearheading the project is new TMPAA member Breckenridge Insurance Services Inc.,which specializes in alternative risk transfer. Other membersinvolved are Milliman Inc., which will handle actuarial services;Ullico Casualty Group Inc., protected captive cell manager; and lawfirm Wilson Elser, which will oversee defense, claims and riskmanagement services.

Lloyd's of London is the issuing carrier for the program's$3 million in primary limits/$3 million aggregate,with other TMPAA carrier members available to provide excesscoverage of up to $10 million. The captive will be domiciled inWashington, D.C. and available for Jan. 1, 2011 renewals. Althoughprice will vary depending on coverage, the initial investment isestimated to range between $50,000 to $150,000,Clark said.

Readrelated: "Captive audience."

TMPAA founders had always planned to offer members a captiveprogram, Clark said. "We needed a 'champion' to drive the conceptfrom idea to execution, and Breckenridge filledthat gap," he added.

Although the standard insurance market is currently awash inlow-priced E&O coverage, captives allow participants to assumea portion of their own risk, giving members more control, Clarksaid. This can result in pricing and coverage stability as well aslong-term cost savings over the course of 3 to 5 years, he said."Because our claims will be handled by Target Markets memberWilson Elser, we also can use loss experience as ateaching tool for our policy holders. If loss performance is betterthan expected, TMIC will share profits with participants," hesaid.

Read related: "School's almost in at TMPAA's TargetUniversity."

The protected cell structure ensures thatinvestors' individual results will remain untouched, with coveragelimits based on demand, added Mark W. Hinkley, reinsuranceconsultant for Breckenridge. "This in some ways is how theinsurance business is going-- less being handled by large,monolithic companies and more individual risk management andknowledge of class to improve loss ratios," Hinkley said. "It's aperfect match of companies and entrepreneurs."

Readrelated: "TMPAA develops captive for members E&O."

The real benefit of the captive is the fact that TMPAAmembers will be directly involved in its development and operation,said Peter Foley, executive vice president at Breckenridge.

Now that the captive's structure has been fleshed out,interested is beginning to build. The captive committee receivedseveral applications at last week's meeting, and TMPAA members willbe able to apply online in early November, Foley added. "Mostmembers can find E&O coverage at a reasonable rate, but itwon't stay that way forever," he said. "More importantly, here is achance to participate and build value in your business. We will bevery conservative and transparent. The captive is not purely aninvestment but a way to establish stability and build value in thebusiness."

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