Large restaurant chain product contamination risk leads to captive formation

The Challenge

A leading restaurant chain with more than 1,700 locations – including corporate stores and franchise-owned restaurants — had concerns about how product contamination exposure could impact several of their restaurants. Historically, the client did not purchase commercial coverage to insure the risk due to minimal claims experience. However, rapid growth in the expansion of their franchise led to increased exposures. Our Marsh Captive Solutions practice was engaged to assess the potential value of incorporating a captive to insure this risk as well as others, including earthquake and windstorm deductibles.

The Solution

Considering the potential magnitude of the product’s contamination risks, the Marsh Captive Solutions team worked with Marsh Industry specialists to determine the optimal limit and coverages the captive should assume, along with the appropriate premium, versus which risks should be transferred to a commercial insurer. The team also identified other high-severity risks that were currently being retained, but could be of value to insure through the captive. With several high-revenue restaurants located in hazard zones, it was recommended that earthquake and windstorm deductibles be included in the captive as well. This process helped to define the optimal business plan for the captive, providing potential tax efficiencies and greater financial stability for the organisation.

The Results

The feasibility study demonstrated that the client could use a captive to formally segregate funds over time in a regulated entity to mitigate the impact of an unexpected product contamination claim instead of buying the coverage from the commercial market. This will allow the client to set aside the premium in their own captive. In addition, the captive will help the organisation to reduce their long-term dependency on the commercial market, especially within the first layers, for other risks such as earthquake and windstorm. In addition, the client will gain potential tax efficiencies surrounding the buildup of excess funds that could result from favourable loss experience.

Captives at the core of innovative risk management strategies

As organisations and the risk environment evolve, many organisations are leveraging captives at the core of their risk management strategies. Having captives at the core helps companies accelerate corporate objectives, support business units, access alternative risk capital, and protect human capital.

Corporate business team meeting discussion and startup concept. Coworking team meeting. Group of two businesspeople working with new startup project in modern office.

Case Study

The Challenge

The Solution

The Results

Captives at the core of innovative risk management strategies

Our work

Supporting a multinational firm in establishing and managing an employee benefits captive

Using Risk Finance Optimisation to better leverage a transportation captive

Health care firm cyber risk modelling leads to expanded captive use

Related insights

Historic Captive Growth Continues

Making the case for a UK captive insurance regime

Exploring the Core Principles of Captive Insurance

Captive insurers continue expanding coverage in property, casualty, and beyond

Marsh.com Sign in

Large restaurant chain product contamination risk leads to captive formation

The Challenge

The Solution

The Results

Captives at the core of innovative risk management strategies

Our work

Supporting a multinational firm in establishing and managing an employee benefits captive

Using Risk Finance Optimisation to better leverage a transportation captive

Health care firm cyber risk modelling leads to expanded captive use

Related insights

Historic Captive Growth Continues

Making the case for a UK captive insurance regime

Exploring the Core Principles of Captive Insurance

Captive insurers continue expanding coverage in property, casualty, and beyond