The Coca-Cola Company could expand the use of its captive insurance company Red Re to fund additional benefits risks, including life insurance and accidental death and dismemberment (AD&D) policies from Metropolitan Life Insurance, after the US labour department submitted a proposal.
Atlanta-based Coca Cola is currently the world’s largest beverage company. It markets four of the world’s top five non-alcoholic sparkling brands.
Red Re—one of three Coca-Cola captives—provides deductible reimbursement policies for selected automobile, product, premises and general liability, as well as workers compensation and terrorism risks.
It is domiciled in South Carolina and is required to maintain $15 million of capital and surplus.
The Department of Labor’s proposed exemption to tax and employee laws allowing Red Re to fund additional benefits risks was published in the Federal Register on 28 December to make it available for public comment.
Life Insurance Company of America is the current direct insurer for Coca-Cola’s term life insurance and AD&D coverage, but under the proposed exemption, MetLife will take over and Red Re will reinsure 90 percent of the risks, effective from 1 January for five years.
Allowing Red Re to reinsure Coca-Cola’s life insurance coverage will lead to an increase in all of its employees’ employer-paid group term life insurance, according to the Federal Register.
“The ‘basic life amount’ under the group term life insurance will increase to an amount equal to such employee's basic annual earnings rounded up to the next higher $1,000 multiplied by 1.5 times, up to a maximum benefit of $2,000,000.”
“[Coca-Cola] has further committed that employees with basic annual earnings below $25,000 will receive group term life insurance with a minimum ‘basic life amount’ of $30,000, and that employees with basic annual earnings of $25,000 to $39,999 will receive group term life insurance with a ‘basic life amount’ of $60,000. An employee will receive group term life insurance in the amount of his or her current ‘basic life amount’ times 1.2.”
Coca-Cola originally sought to expand the use of its captive in August 2012.
In March of the same year, Coca-Cola used its Dublin-based captive insurer to fund benefits that were earned by pension plan participants in the UK and Ireland.
