The U.S. Labor Department has proposed allowing The Coca-Cola Co. to expand the use of its South Carolina captive insurance company to fund additional benefits risks.
Atlanta-based Coca-Cola wants to use its Red Re Inc. captive to reinsure life insurance and accidental death and dismemberment policies written by Metropolitan Life Insurance Co.
Coca-Cola, the world's largest nonalcoholic beverage company, now uses Red Re, one of three Coca-Cola captives, for a wide range of risks, including reinsuring fronting insurers used to provide international benefit coverages.
The proposed exemption was published in the Dec. 28 issue of the Federal Register.
The application is separate from a complex Coca-Cola retiree health care funding arrangement the Labor Department approved in 2010.
Under that arrangement, Coca-Cola would use funds now held in a trust—known as a voluntary employees' beneficiary association—to purchase medical stop-loss policies from Prudential Insurance Co. of America to pay claims over the expected lifetime of about 4,000 retirees and dependents.
In turn, Prudential would use the premium it receives from Coca-Cola to reinsure the risk with Red Re.
Coca-Cola is waiting for a private-letter ruling from the Internal Revenue Service before proceeding.
Captive benefit approval process under review
Coca-Cola's application is the first to receive Labor Department tentative authorization since Labor Department regulators said last year they were reviewing the criteria employers must satisfy to win approval of captive benefit funding arrangements.
Prior to that review, in 2012, the Labor Department approved captive benefit applications filed by Google Inc., the Mountain View, California-based search engine giant; Microsoft Corp. of Richmond, Washington; R+L Carriers Shared Services L.L.C., a Wilmington, Ohio-based freight carrier, and Via Christi Health, a big Wichita, Kansas-based health care system.