Federal Motor Carriers Risk Retention Group (FMCRRG), aDelaware-domiciled RRG that provides commercial auto liabilitycoverage for midsize trucking companies, has found a way to offertruckers competitive rates at a time when they are feeling the painof skyrocketing fuel costs.

The RRG has structured a purchasing group program that resemblesa type of “reverse cell” arrangement, enabling it to offerinsurance to truck owner/operators with small fleets in multiplestates.

To accommodate the program, six Delaware-domiciled PGs have beenformed, all bearing the name CBIP Advantage of (State), LLC, forthe following states: California, Florida, Louisiana, New Jersey,Pennsylvania and Texas.

Joseph K. Valuntas serves as the chief operating officer of boththe RRG and CBIP–a Farmingdale, N.J.-based specialty insurance firmthat serves as the program manager for the RRG and PGs.

He said establishing the PGs enables FMCRRG to add smalltrucking fleets (those having from one-to-five power units) whilemaintaining the requirements for the RRG, which targets largerfleets (having from 40-to-200 power units).

With the addition of the six PGs, FMCRRG now insures seven PGs,including a California book of business recently rolled into aPG.

Among the other points of interest for the program:

o Truckers who join the PGs are required to make the samecapital contribution to the RRG as RRG insureds–$500 per powerunit.

o Underwriting criteria used to determine eligibility for thePGs is the same as that used for RRG membership.

o Claims handling and other services used for the RRG are alsoused for the PGs.

o There is a $1,000 deductible for both RRG and PG members.

Mr. Valuntas explained that built into pricing is a“member-specific” loss fund amount for each PG member, funded by aportion of the member's premium.

In the event of a payable claim, the member's $1,000 deductibleis tapped first, followed by the loss fund.

If the claim amount exceeds the combined amount of thedeductible and the loss fund, the RRG then responds.

Multiple policy limits up to $1 million are available through amaster policy issued to the PG, with certificates of insuranceissued to PG members.

All PG members have voting rights in the RRG.

He said this type of “reverse cell” structure is distinguishedfrom a protected-cell arrangement, where the protected cells sitbehind the RRG.

In this model, the PGs sit in front of the RRG, with the PGinsured's loss fund taking the first layer of loss and the RRGcoming in above that. By contrast is a protected cell, where theRRG takes the first layer of loss and the protected cellsfollow.

In addition, he noted that the PGs are “one of the competitiveadvantages we have, particularly in California, where a lot ofcompetitors will only write intrastate [local] truckers. We havefound a niche to write long-haul truckers who operate in bothinter- and intrastate commerce.”

The PGs also offer truckers competitive rates, at a time whenthey are feeling the pain of ever-increasing fuel costs, hesaid.

With long-term relationships that CBIP has developed withretailers across the country, Mr. Valuntas expects more PGs willcome on line using this model.

As for the PGs currently formed, he anticipates $3.5 million inpremium for the first full year of operations, growing to $15million by the third year.