Calif. Nonprofits Charitable Risk Pool Plans National Expansion

By | August 7, 2000

For more than a decade, National Insurance Alliance of California (NIAC) has borne the unique distinction of being a nonprofit organization which insures other nonprofit groups in the state of California.

Now, thanks to a $5-million grant from the David and Lucile Packard Foundation, matching one made by the Bill & Melinda Gates Foundation in August 1999, NIAC can move closer to its goal of becoming an A.M. Best-rated company with a nationwide presence.

“NIAC is the only organization of its type that is called a charitable risk pool,” said NIAC president and CEO Pamela Davis, explaining how the member-owned, 501(c)3 tax-exempt nonprofit operates.

Writing a broad spectrum of nonprofits, ranging from social service groups to museums to SPCAs, there is veritably no type of nonprofit organization that NIAC will not consider. This will remain a constant as expansion into other states unfolds. “We will be doing exactly the same types of groups,” Davis said. “They all have to be 501(c)3 tax-exempt nonprofits because we are one ourselves.”

To determine how the goal of serving other states could be accomplished, the alliance created a business plan funded by the Packard Foundation and finished in April 1999. Ultimately, the chosen strategy was to leave NIAC intact, create a new risk retention group called the Alliance of Nonprofits for Insurance, and then create an association captive. The latter will be owned jointly by the members of the two other pools, which include NIAC members in California and members of the risk retention group in other states.

“That is where the spread of risk will occur,” Davis said. “The benefit for California is to be able to get a good rating from Best, and the benefit for the other states is to be able to have the same pooling arrangement that we have in California.”

Both the risk retention group and the association captive have already been domiciled in Vermont, and a service company has also been created, all of which will be nonprofit companies like NIAC.

Currently underway is the process of selecting a captive manager for the companies and generally putting everything in place in order to be operational by a target date of Jan. 1, 2001.

“We have been in conversations for the last year with various state associations of nonprofits as well as the National Council of Nonprofits Association,” Davis explained. Operations are likely to begin in states that have very strong state associations, such as Delaware, the District of Columbia and Colorado, which are interested in participating in the expansion. Another early addition will probably be Nevada due to the expansion of California nonprofits into that state.

“Then we would hope to do a thoughtful rollout of the other states,” Davis continued. “How quickly we add other states and which ones they will be has not yet been determined. We’re going to do the first rollout and see where that goes.”

Davis emphasized the twofold purpose of the projected expansion. The first is to bring stability in pricing and coverage to a specialized market that has unique coverage needs. “Having a stable, predictable price to budget is extremely important for these kinds of organizations,” she said. “Fluctuations of the market are very tough for [them].”

However, Davis said an even bigger goal is rooted in a commitment to risk management. “Our larger purpose is to provide nonprofits with management tools so that they can be better and more efficiently managed through this process,” she said.

Also underscored was the fact that without the generous support of two of the largest foundations in the world, it would not be possible to see these expansion plans come into fruition.

“This is very much of a leadership thing for these two foundations to be doing,” Davis concluded. “To be creating a nationwide organization with this sizable amount of money…is very forward looking.”

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Insurance Journal West August 7, 2000
August 7, 2000
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