Topco Associates LLC, America’s largest retail food group purchasing organisation (GPO), is planning further cell set-ups having formed a sponsored captive in November last year.
As a GPO, Topco operates as member-owned co-operative of 45 grocery chains, aggregating purchases and knowledge management across the company to drive savings and innovation.
It formed a sponsored captive, Member Owned Topco Insurance Solutions (MOTIS), in Vermont last year, and speaking on the Global Captive Podcast Adam Binder, category director for the group’s indirect spend program, explained the rationale and motivation behind the captive formation.
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“One of our big objectives is to help our members save money, to stay competitive and compete with the big box retailers as margins are very thin in grocery retail,” he said.
“When we started looking into insurance and HR benefits and having conversations with the executives, it was pretty clear that they were struggling buying insurance. There was capacity issues, so they didn’t have access to certain lines of insurance.
“These guys are selling fuel, tobacco, CBD so there were challenges in terms of getting the right coverage and it was also a very hard market.”
These conversations took place in 2020 and 2021 when some of the group’s companies were experiencing 20% to 30% premium increases in property and cyber and they were asking Topco if they could help address this.
After attending a virtual VCIA conference during the pandemic and conducting a request for proposal (RFP), Topco engaged Hylant and Milliman to kick off the captive project and engage members to see who would be interested in participating in a captive project.
“Anytime you explore a captive opportunity, and particularly when you have a group scenario in this particular instance, or a co-op or an industry association, it’s going to take time and education,” said Anne Marie Towle, CEO of Hylant’s Global Risk Captive Solutions.
“People need to be conscious of building in that time element because a lot of times people will approach us and say, ‘we need a captive and we need it very quickly’. And being thoughtful in that process, having the member buy-in, thoroughly educating them is ultimately important in order to grow successfully.”
When Topco surveyed its members, 19 of the 45 said they would like to engage in a feasibility study, starting with workers’ compensation, general liability and auto. Combined, the premium spend across those lines added up to $170m.
Binder said with that feedback and data, it provided the urgency to get the sponsored captive established.
Associated Food Stores, based in Salt Lake City, Utah, is the first cell to be established within MOTIS, writing workers’ comp, general liability and auto, while Topco as a corporation is the second cell.
Topco will be utilising its cell to write general liability, cyber liability and medical stop loss.
“We have conversations lined up with other members to get started,” Binder added.
Adam Miholic, senior consultant at Hylant Global Captive Solutions, worked closely with Topco on the project, and continues to support the addition of new cells.
He explained on the podcast why a sponsored captive, rather than a single parent, was the right structure for the strategy.
“Everything that we talked about with the executive leadership team from Topco in those early stages was ‘this really is for the benefit of the members’,” Miholic said.
“Topco, as the association, was really the sponsor of this entire process, and they funded the feasibility study for the members. They brought the idea out to the members as part of a benefit of being a co-op owner, member of Topco.
“So when we thought about how do we translate that into the insurance world and a captive structure, the cell captive made just unbelievably good sense because you have Topco sponsoring it now as the core and they are renting out cells to their members for any type of risk that you could think of as exhibited in their industry.
“Really making it flexible and nimble, but always under the premise of it’s to the benefit of the members so a single parent captive really was not too big of an option after we had some initial conversations about what’s the long-term goals and objectives of this.”
Listen to the full interview with Topco’s Adam Binder, joined by Hylant’s Anne Marie Towle and Adami Miholic, on the Global Captive Podcast here, or on any podcast app. Just search for ‘Global Captive Podcast’ on any podcast choice.
