Butler University Launches a Wholly Student-Run Captive Insurance Company

Students will make coverage decision on some of the university’s most valuable assets.

There are few better ways to prepare students for business careers than to give them hands-on experience running their own companies. With that in mind, last year, Butler University’s Lacy School of Business in Indianapolis, Indiana, established the MJ Student-Run Insurance Company.

Created with a gift from MJ Insurance and its founder Michael M. Bill, the operation is a “captive insurance company,” meaning that it is owned by the entity it insures. The students’ captive insurance company will insure many items at the university, including Butler’s live mascot, an English bulldog named Butler Blue III; rare books; artwork; and the telescope at the Holcomb Observatory. In the process, students learn to write insurance policies, establish coverage terms, finance the company, and manage risk.

The first order of business was for students to obtain a license to operate from the British territory of Bermuda—considered a global hub for insurance—based on their analysis of the country’s regulatory and tax environment. In April last year, students appeared before the Bermuda Monetary Authority to provide evidence of their company’s ability to act as an insurance firm. With this license, the company will be able to pay out losses of up to US$250,000 a year. It will be audited by KPMG, and it is backed by Aon, the world’s largest insurance broker.

One motivation for launching the company was to give students hands-on experience in the field. Another was to help fill the 400,000 job openings the insurance industry expects to have as 25 percent of current insurance professionals get set to retire by 2022.

The insurance industry might have more trouble than other sectors finding the graduates it needs, says Zach Finn, clinical professor and director of Butler’s Davey Risk Management and Insurance Program. He notes that while 1,900 U.S. universities have accounting programs, only 82 offer insurance and risk programs.

By running their own company, risk management and insurance majors will have opportunities to analyze risks that face the university and assess their financial impacts. Then, they can determine whether it would be best for the university to assume the cost of those risks or to insure against them through either a traditional or captive insurance company.

Students have the added benefit of learning more about the items their company ensures, from cosmic objects at the school’s planetarium to rare books at the library. Finn notes that he chose coverages for the students’ company that would not only immerse them in the insurance industry, but that also would expose them to other disciplines. So far, he says, “We’ve learned about poets, paintings, planets, and more. I am going to leverage the liberal arts education they received at Butler.”