Read the following two articles to discuss the change in Coca Colas captive insurance over time. Are these two articles helping you better understand the concept of captive insurance? Explain.

FIRST ARTICLE:

BOCA RATON, Fla. For The Coca-Cola Co., the advantage of funding employee benefit risks through its South Carolina-based captive insurer is very straightforward.

It is a more efficient way of providing benefits, said Stacy Apter, Coca-Cola's director of global benefits financing and asset management in Atlanta.

Speaking Tuesday at a session of the 25th annual meeting of the World Captive Forum in Boca Raton, Florida, Ms. Apter said captive benefits funding ensures that the company pays the real cost of providing benefits rather than a premium to a commercial insurer that includes a profit for the insurer.

Among other things, Coca-Cola uses its captive, Red Re Inc., to fund international life, disability and medical insurance benefits. In 2013, the company also received authorization from the U.S. Department of Labor to fund accidental death and dismemberment benefits for U.S. employees through the captive.

There are other advantages to captive benefits funding, Ms. Apter said. For example, funding benefit risks diversifies a captive's book of business while also ensuring greater predictability of costs compared with buying benefit coverages in the commercial market, where rates can fluctuate wildly from one year to the next.

We are not going to price coverages at a deficit to keep the business, Ms. Apter said.

Still, there are challenges to funding benefit risks through captives, Ms. Apter said, noting that a hands-on approach is required.

It is not an autopilot program, she said.

In addition, it took lots of travel and meetings to get local Coca-Cola units abroad to participate, she said.

At the same time, You have to explain to local managers how captive benefit funding works, said Pascal Prevost, an executive with Nestle S.A.'s group risk services in Vevey, Switzerland, who also spoke at the WCF session.

Worldwide, roughly 70 to 80 employers use their captives to fund benefit risks, said Mark Cook, a principal with Towers Watson & Co. in London, another speaker at the session.

There is a lot of interest in this area, he said.

Indeed, just last month, two U.S. big employers Hormel Foods Corp. in Austin, Minnesota, and Sealed Air Corp. in Charlotte, North Carolinafiled applications with the Labor Department seeking DOL approval through a rapid regulatory review procedure to fund certain benefit risks through their Vermont captives.

The department is expected to hand down its rulings sometime in March, which, if favorable, could spur additional employers to expand their captives to fund benefit risks, experts say.

SECOND ARTICLE: 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 worlds largest beverage company. It markets four of the worlds top five non-alcoholic sparkling brands.

Red Reone of three Coca-Cola captivesprovides 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 Labors 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-Colas 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-Colas 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.