Innovative self insurance deal delivers savings

Affinity Sutton and Acumus team up to deliver insurance savings

• Affinity Sutton among first in sector to adopt innovative protected cell captive arrangement.
• Deal forecast to deliver average savings of about £250,000 annually.
• Risk successfully managed with claims above £90K covered by third party insurers.

Acumus, the sector-specialist insurance broker has launched an innovative off-shore captive insurance arrangement, and national affordable housing provider Affinity Sutton is the first housing association to join up.

The pioneering value for money measure – a first for the sector – will see Affinity Sutton insure through the Guernsey-based insurance vehicle, Igloo Insurance PCC Limited.  High level claims will be covered by a third party underwriter.

Both South East London based Gallions Housing Association and RCT Homes in Wales are also set to sign captive agreements with Igloo.

The arrangements are structured through a corporate structure called a protected cell company.  Captive insurance is essentially an “in-house” insurance company with a limited purpose and is not available to the general public.  Premiums are paid into a “cell” to cover the likely cost of all routine claims with a cap on losses for any individual claims and as well as accumulated yearly loss.  Reinsurance is purchased to cover against large single and aggregate losses. 

The captive model is widely used by UK PLCs such as Tesco and Marks & Spencer as well as some public sector bodies including Transport for London and the Corporation of London.

The arrangement will see Affinity Sutton benefit from an expected reduction in insurance costs over time and have access to expertise to assist with the improved management of risk and risk mitigation.

The arrangement will also provide:

• Long term stability - protection from market upward price movements or shocks.
• Savings as a result of risk management, improved claims management (or even good fortune) are gained by the captive/cell owners not insurers.

Mark Washer, Group Finance Director for Affinity Sutton, said:  “Our groundbreaking agreement with Igloo Insurance PCC Limited is an important tool to keep the business focussed on managing its major risks, and represents another significant milestone in delivering efficiencies. As a business for social purpose, Affinity Sutton is committed to being an efficient organisation and delivering a value for money service to our customers.   This arrangement is a clear illustration of how we will deliver value for money by concentrating on spending less and delivering more and better services.”

Tony Cotter, Chief Executive of Gallions Housing Association, added: “This initiative is warmly welcomed by Gallions. This type of scheme is one that we have been interested in for some time and offers the potential to avoid the pitfalls of the normal volatility of the insurance market.”

Huw Thomas, Chief Executive of Acumus, highlighted the benefits of the new initiative, said: “Housing associations have been looking for a safe way to carry more of their own risk for a long time and Igloo provides this with minimal cost, it also addresses many of the requirements identified by housing associations in the recently published Procurement for Housing insurance survey.”