REM Spreads its Wings

A third-party administrator set up to manage the runoff business of an insurer in liquidation spreads its wings.

By CYRIL TUOHY, managing editor of Risk & Insurance®

Third-party administrator Risk Enterprise Management Ltd. (REM) started life in the womb of Zurich North America in 1995, when REM was created to manage the assets and liabilities of the Home Insurance Co., a New Hampshire-based insurer placed into runoff in 2003.

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From the start, REM was founded with the idea that it would branch out beyond managing and honoring the insurance claims outstanding from a carrier placed into runoff. In REM's case, the hope was that the company would one day blossom into the third-party administration business.

"REM was formed to manage that runoff, but the founder of REM, Peter Johnson, agreed to come on board to form REM and lead it with the intention of creating a third-party business," said Mike Riney, president and CEO of REM.

Even as a wholly owned subsidiary of Zurich, REM had sown the sees of its future independence. Although part of Zurich, it hired its own people and had its own real estate and systems. In fact, REM reported to bosses in Switzerland, not the United States.

Finally, on Nov. 30, 2007, Zurich spun off the company as the future TPA to be didn't fit with Zurich's longer-terms goals, and REM was free to pursue its own business plan.

Leaving Zurich also meant that REM had to fend for itself, which it did.Now, 2 years after leaving the Zurich fold, REM, headquartered in Cranbury, N.J., is all grown up. The company lists 16 offices around the country; boasts a thriving book of business; maintains a fanatical approach to control of loss costs; and sports a loyal customer base in the retail, healthcare, energy, hospitality, construction, staffing, manufacturing and transportation sectors.

With Home Insurance in liquidation since 2003, the runoff business is nowhere near as large a segment at REM as it used to be.

Runoff engagements require a customized approach and a host of questions need to be answered before a proposal can even be made, said Riney, Did the company sell policies that would be defined as short-tail or long lines? Is the engagement going to be over within a short period of time or are these long-tale lines such as construction defect, where claims may not materialize for years. What is the company strategy? Is the company interested in closing down the runoff as soon as possible?

"There are so many different strategies, so many different needs that companies entering runoff may be contemplating that one size never fits all, and we need to provide a business plan that complements that strategy," said Riney, former head of commercial claims for CNA Insurance Co., and before that, head of Continental Loss Adjusting, a Continental Insurance company., before Johnson recruited him to work at REM.

The runoff business, added Riney, is "not a game for amateurs."

"We didn't want to be known as just doing runoff business," he said.

With backing from Fund Management Group, REM spun off from Zurich and spread its business wings, providing claims and managed care services to industry segments from retail to transportation. REM's appetite is a focus on Fortune 2000 companies, typically self-insured, where a risk manager is the ultimate decision-maker in terms the buying decision.

REM's staff, said Riney, takes claims very personally. The company goes so far as to allow new clients to interview claims adjuster to be assigned to their account.

"We encourage clients to interview our adjusters," said Riney. "We want them to be totally on board. That is pretty personal. We want our adjusters to be compensated on how well they take care of our customers."

October 1, 2009

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