An insurance entity, organized as a stock, mutual or reciprocal
company, offers claims paid property and causality insurance. This
organization offers improvements over a risk-sharing vehicle such
as MPT by removing unlimited liability and by capping annual assessments,
while retaining the lower cost achievable by a claims-paid policy.
What is claimed is:
1. A method for insuring a property or casualty loss of a party
with a claims paid insurance policy, the method comprising: determining
a claims paid insurance premium for the insured party; charging
the premium to the insured party; obligating the insured party to
pay the premium without an opportunity to cancel the policy; receiving
payment of the premium from the insured party; and assuming liability
for a claim against the insured party responsive to the claim being
2. The method of claim 1, wherein determining a claims paid insurance
premium further comprises: evaluating a cost object model to forecast
expenditures bases on claims asserted against a group of insured
parties; calculating an overall premium for the group of insured
parties from the forecasted expenditures; and allocating a portion
of the overall premium to the insured party.
3. The method of claim 2, wherein allocating a portion of the overall
premium further comprises: applying, to the allocated portion, an
adjustment factor based at least upon risk relativity, risk maturity,
geographic, or policy-specific risk experience.
4. The method of claim 1, further comprising: receiving, from the
insured party, a request for renewal of the claims paid insurance
policy; and granting the request for renewal subject to the determining
of the claims paid insurance premium.
5. The method of claim 1, further comprising: performing a risk
review of the insured party; canceling the claims paid insurance
policy of the insured party responsive to the risk review; and providing
tail coverage to the insured party for an open claim.
6. The method of claim 1, further comprising: defending the claim
against the insured party.
7. The method of claim 1, wherein the insured party is indemnified
for a loss due to at least one of professional liability, medical
professional liability, property liability, and casualty liability.
 This application is a continuation of U.S. patent application
Ser. No. 10/140,434, filed on May 8, 2002, entitled "Property/Casualty
Insurance and Techniques," which claims the benefit under 35
U.S.C. .sctn.119(e) of U.S. Provisional Patent Application No. 60/289,127
filed on May 8, 2001, entitled "Professional Liability Insurance
Techniques," both of which are incorporated by reference herein
in their entireties.
 The invention is related to insurance and more particularly
to property and casualty insurance and techniques.
 In the usual insurance transaction, a party wishing to protect
himself against a risk makes a contract with an insurance company,
typically exchanging payments (premiums) for a promise (set forth
in an insurance policy) to have the risk covered. There are a number
of organizational forms used for insurance companies, depending
on the state of formation, including stock insurers, mutual insurers
and reciprocal insurers (also called interinsurance exchanges).
Typically, the insured had no special relationship to the insurer.
There are also forms of "captive" insurance companies,
where the insurer is owned by the insureds.
 Insurance companies predict losses of existing and potential
policyholders and set premiums based on actuarial analysis. This
process of matching the premium to the risk is called "underwriting."
The determination of whether to accept a potential policyholder
is based on policyholder characteristics obtained by application,
questionnaire, credit check and other factual inquiries. Premiums
may be uniform for all policyholder that purchase the same coverage,
or the insurance company may use a classification plan. A classification
plan uses known characteristics of a policyholder to determine the
likelihood that the policyholder will submit claims to the insurance
company, thereby incurring losses. A classification plan is also
used to determine the expected size of claims based on known characteristics
of the policyholder. In the case of physician professional liability
insurance, physicians may be classified by specialty, and uniform
rates charged for physicians within each specialty class.
 Even taking into account adjustments based on specialty
classification and other premium adjustments, policyholders with
a history of few claims may be able to establish that, by sharing
risk among a smaller, more select group of policyholders, overall
losses (and therefore premiums) may be reduced. Captive insurers
are often formed by organizations or individuals that are in a common
business, who believe that, because they represent better than average
risks, they will be able to provide coverage to themselves at better,
more stable rates than commercial insurers.
 Captive insurance companies typically write policies and
reserve for losses in a manner similar to commercial insurance companies.
For example, a professional liability insurance company (captive
or commercial) generally will issue either (i) a "claims made"
policy, meaning that a policyholder's policy for a given policy
year covers a claim (up to the policy limits) based on whether the
claim is filed or reported during the policy period (in other words,
filing the claim triggers coverage under the policy), or (ii) an
"occurrence" policy, meaning that the policy covers all
such claims that arise out of occurrences during the policy year,
even if the claim if filed thereafter. The insurance company generally
is obligated to defend the claim and eventually pay any losses,
and the losses and costs will apply to the policy year that the
claim was made. In advance of payment of the claim, the insurance
company will set a "reserve" for the claim on its books.
An insurance company's reserves constitute a liability. State insurance
laws govern the surplus of assets over liabilities that must be
maintained by an insurance company in order to be licensed in or
do business in the state.
SUMMARY OF THE INVENTION
 The invention is directed to providing property and casualty
insurance in a form which improves over both the usual forms (i.e.,
"claims made" and "occurrence" coverage) of
insurance company product and coverage provided by captive programs,
including an interindemnity trust. This advancement is created by
providing a claims paid insurance product under applicable insurance
laws, as opposed to claim made or occurrence coverages.
 Claims-paid coverage may be obtained currently in the medical
malpractice environment in a few jurisdictions under restricted
conditions. However, the success in this line of risk sharing can
be translated into advancements for the property and casualty insurance
businesses that require risk management, sophisticated claims handling
and either long-tail or short-tail liabilities. For example, dental
malpractice, legal malpractice, earthquake damages and general property
risks all have characteristics that can benefit from this new and
improved form of insurance. In general, a claims-paid insurance
policy is an effort to align the incentives of the covered entity,
the risk-taker and the injured person in a formula that benefits
all parties. A claims-paid policy encourages appropriate risk management,
underwriting and claims handling in a manner that is different than
the current insurance policies available in the marketplace.
 In one embodiment, the claims paid insurance policy can
be provided by a "risk retention group" ("RRG").
The definition of "risk retention group" under the Federal
Liability Risk Retention Act of 1986 provides that an RRG means
any "corporation or other limited liability association"
that, among other requirements, "is chartered and licensed
as a liability insurance company under the laws of a State and authorized
to engage in the business of insurance under the laws of such State."
(15 U.S.C. 3901(a)(4)) The following is a summary of RRG requirements
in addition to being licensed as an insurer in a state: (1) the
RRG's primary activity and primary purpose consists of spreading
the liability exposures of its members; (2) the RRG does not exclude
persons from membership solely in order to provide a competitive
advantage for RRG members; (3) all owners are insureds; (4) the
members/insureds are engaged in activities that are similar with
respect to the risks raised; (5) the only insurance or reinsurance
provided relates to the liability risks of RRG members; and (6)
the name includes the phrase "risk retention group."
 Since an RRG is, by definition, a captive or select insurer,
RRGs often are formed under state insurance laws that apply to captives.
Those states that have broad captive insurance company laws generally
allow a captive insurer to be organized as a stock, mutual or reciprocal
insurer. A reciprocal insurer (which is similar to the current organizational
form of the Mutual Protection Trust ("MPT"), which is
described below) is an unincorporated form of insurance company,
where the insureds (also called "subscribers") exchange
contracts of insurance with each other through an attorney in fact.
The attorney in fact may obligate the subscribers severally (not
jointly) on contracts of insurance made by the subscribers, within
the limits specified in each subscriber's power of attorney to the
attorney in fact.
 However, claims-paid coverage can also be provided through
the traditional vehicles if a company chooses to obtain the regulatory
approvals from appropriate state insurance commissioners for this
new type insurance. The RRG and captive vehicles are highlighted
simply because these structures are most akin to the current MPT
format and facilitate descriptions of the coverage. Claims-paid
coverage is not dependent on the corporate structure or licensed
entity. Rather it is a new product that provides a unique form of
risk shifting arrangement that prompts enhanced cooperation between
the insured and insurer.
 The foregoing and other features, aspects and advantages
of the present invention will become more apparent from the following
detailed description of the present invention when taken in conjunction
with the accompanying drawings.
BRIEF DESCRIPTION OF THE DRAWINGS
 The other features, aspects and advantages of the system
of the present invention will be apparent from the following description
 FIG. 1 is a diagram illustration the relationship between
an insurer and an insured as known in the prior art.
 FIG. 2 is a diagram illustration relationships between insureds
and an interindemnity trust entity such as MPT (described below).
 FIG. 3 is a diagram illustrating the relationship between
an insured and an insurer providing "claims paid" coverage
(described below) in accordance with one aspect of the invention.
 FIG. 4 is a flow chart of a process for forming a "claims
paid" property and casualty liability insurance company in
accordance with another aspect of the invention.
DETAILED DESCRIPTION OF THE EMBODIMENTS
 FIG. 1 is a diagram illustrating the relationship between
an insurer and an insured as known in the prior art. In FIG. 1,
an insured (100) enters into a contract (120) with an insurance
company (110) pursuant to which the insured agrees to pay premiums
to the insurance company in exchange for an insurance company assuming
all or part of economic loss which results from a risk occurring.
Examples of a risk that might cause economic loss against which
an insured might desire insurance include:
 (1) homeowner's liability;
 (2) professional negligence liability for physicians, dentists
or other professionals; or
 (3) automobile liability.
 Insurance companies are highly regulated entities. These
entities are required to set aside appropriate reserves to pay for
the eventuality that a loss might occur. The reserves generally
must take into account both reported (but not yet paid) losses,
and incurred but not reported ("IBNR")losses.
 Currently, insurance companies offer one of two types of
policies: occurrence or claims made. Under and occurrence policy,
an insurance company assumes the risk for certain events that "occur"
during a particular period of time. The insured party has an open
ended period of time after discovery of the injury to report the
claim to the carrier. Under occurrence policies, injuries identified
in a current year can reach back many years to trigger the policy
covering the time that the injury first started for insurance coverage.
Due to the uncertainty of future liability, occurrence policies
are significantly more expensive than the only other alternative
in the market, claims-made. Claims-made coverage focuses upon the
date of discovery of the loss rather the date the event occurred.
Claims-made policies grew in popularity in the 1960s and 1970s because
these policies provide a greater degree of certainty to the carriers
as to potential exposures and are less expensive for the insured.
These two policies are offered by most carriers, with claims-made
the more common form of coverage.
 In addition to traditional insurance, new types of risk
sharing techniques have been developed including the "claims
paid" coverage. The risk alternative is operated through statutory
schemes in various states and is limited to the physician liability
risks. Under these regulatory regimes, a company must establish
an interindemnity trust or risk pool, subject to the specific statutory
requirements for such programs, as opposed to the general insurance
laws of the state. Only a few states, notably California, permit
such arrangements. Currently, claims paid medical malpractice coverage
may be provided to California physicians and surgeons (collectively,
"physicians") who are members of a cooperative corporation
(established under the California Corporations Code), through an
unincorporated interindemnity or reciprocal or interinsurance arrangement
established under Section 1280.7 of the California Insurance Code.
Such contractual arrangements "do not collect in advance of
loss any moneys other than contributions by each member to a collective
reserve trust fund or for necessary expenses of administration."
Members/insureds agree to make initial contributions to the corpus
of the trust and to pay annual premiums in exchange for defense
of claims and for an agreement to pay any claims for which the member
might become liable. Members are subject to multiple assessments,
to the extent that income earned on the corpus of the reserve fund
in insufficient to pay claims, costs judgments, settlements and
administration costs. Currently there is only one such operating
entity established under California law: the Mutual Protection Trust
("MPT") provides claims paid coverage to those physicians
who are members of Cooperative of American Physicians, Inc. ("CAP").
(The operations of CAP and MPT, as well as the claims paid concept,
are further described hereinafter.)
 FIG. 2 is a diagram illustrating relationships between the
covered persons or members (100) and a claims paid program such
as MPT (200). In a claims paid program, liability accrues only when
the claim is paid, not when the claim is made. If coverage for an
insured terminates, any claim against the insured and all potential
losses (including liability relating to claims already filed) stay
with the insured. This arrangement is a markedly different result
than a traditional "claims made" insurance program, where
all claims that have been reported when coverage ends are the responsibility
of the insurer, and the insured is only responsible for (or must
purchase "tail" coverage for) unreported claims. Termination
from a claims paid program without tail coverage is highly detrimental
to the insured, and therefore an entity such as MPT is not permitted
to terminate a physician from the program or nonrenew coverage,
except under limited circumstances. For this reason, before a person
is admitted as a member of MPT, a rigorous under writing process
(210) is undertaken. This care insures that only individuals who
are committed to practicing relatively safer medicine compared with
the population of professional at large, i.e., individuals who are
sound risks, are admitted into the group. The insured (100), makes
an initial contribution and pays "assessments" in exchange
for claims defense and for payment of any liability, up to specified
limits, resulting from the claim.
 An interindemnity trust such as MPT, or any other entity
permitted under Section 1280.7 of the California Insurance Code
or similar provisions in other states, has certain disadvantages.
These drawbacks include the potential for unlimited liability for
the individual members of the trust, possible mid-year assessments
when payments of claims by the trust exceed premiums paid in for
any particular fiscal year, limitation to California physicians,
and the fact that the arrangement is not insurance under state law,
and therefore may not be as acceptable to potential participating
 FIG. 3 is a diagram illustrating the relationship between
an insured and an insurer providing claims paid coverage in accordance
with one aspect of the invention. One purpose of FIG. 3 is to demonstrate
the uniqueness of the claims-paid policy and that such a policy
can be used in a variety of particular and general insurance settings.
As shown in FIG. 3, an insured (100) makes an initial contribution
to the company (300), which forms a pool of money to be used as
"surplus," to be used to pay claims after other funds
have been exhausted. These funds can be held as subscriber account
and returnable to the insured under certain conditions to the contribution
can be deemed permanent and used by the company for purposes deemed
appropriate. In addition, the insured (100) pays annual premiums
in exchange for a claims paid insurance policy, which provides defense
fan indemnity coverage. As in the case of MPT, each insured undergoes
a vigorous underwriting process before the policy is issued.
 In an advantageous implementation of the invention, the
insurance company (300) is a reciprocal insurance company licensed
as an RRG under the Federal Liability Risk Retention Act of 1986
and corresponding state implementing legislation, for example, the
implementing legislation in the State of Hawaii.
 This improved form of organization provides a number of
benefits over MPT. For example, this form of organization allows
for the potential elimination of the unlimited liability of the
members/insureds for assessments. Instead, assessments are limited
to the extent provided in the reciprocal's contracts with the insured.
Generally, assessments are limited to a multiple of premium, and
may be completely eliminated or limited to a fraction (e.g., 50%)
of premium. In addition, the company would be required to build
reserves for the cost of defending a known claim, which would provide
a greater degree of security to the insured. Further, the protection
provided is actual insurance and would be more acceptable to insureds
and those entities covered by insurance such as hospitals than a
trust arrangement with unlimited liability that is established under
special California enabling legislation.
 In one form of the invention, CAP, as the parent company
(300) would create an organization to function as an attorney-in-fact
(320) (called for convenience "CAP Attorney"). The attorney-in-fact
would act on behalf of the members of the reciprocal insurance company
(300). The reciprocal entity, called for convenience the CAP Insurance
Exchange ("CAP Exchange"), would be created for the purposes
of providing "claims paid" medical malpractice insurance
of other professional liability insurance and other casualty insurance
products brokered by CAP. CAP Attorney would be a wholly owned subsidiary
of CAP and would provide the necessary services for the operation
of CAP Exchange. Before discussing any potential operations of the
CAP Exchange, it is proper to address in detail the operation of
MPT and CAP.
 CAP is a California cooperative corporation formed under
Section 25100(q) of the California Corporations Code to provide
a means by which physicians can join together to mutually protect
their professional standing and finances against claims of professional
negligence and to continue their practice of medicine in a manner
which can be economically and socially justified. As a consumer
cooperative, CAP may engage in any legal business as long as its
business is primarily for the mutual benefit of its members as patrons
of the cooperative. Membership in CAP is limited to physicians.
 Medical malpractice coverage is provided to CAP members
through MPT. MPT is organized pursuant to the provisions of Section
1280.7 of the California Insurance Code. MPT is an unincorporated
interindemnity trust arrangement created for the purpose of offering
professional negligence liability protection to eligible physicians
who reside and are licensed to practice medicine in the State of
California. Under this structure, each MPT member is required to
make an initial contribution to MPT trust corpus (individually,
the "Initial Trust Contribution" or "ITC" and
collectively, the "Corpus") for coverage with limits of
$1.0 million per occurrence with a $3.0 million annual aggregate.
(Higher contributions are required if the member requests a greater
level of coverage.) The ITC currently equals what a physician would
pay in assessments for his first year of mature MPT coverage and
is refunded upon the retirement or voluntarily termination of a
member from MPT if the physician is in good standing and subject
to the bylaws of MPT.
 A member is also required to pay annual dues to CAP and
is personally liable for assessments when the dues and earnings
of the MPT fund are not sufficient to cover the operational costs
for CAP and MPT. As this time, each member pays an assessment based
upon an allocation formula. This formula takes into consideration
the risk classification of the physician's specialty, limits of
liability, the number of months of retroactive coverage, and other
related costs of operation and risk coverage related to MPT. The
assessment is determined by MPT and does not require rate filings
or approvals from the California Department of Corporations, which
is the current state regulator of CAP and MPT.
 The coverage provided through CAP and MPT is for claims
defense and claims payment protection as compared to "claims
made" insurance that is the common medical malpractice insurance
policy provided in California and elsewhere in the United States.
While these policies provide similar protection to doctors, MPT's
program differs from claims made insurance coverage in the method
by which present and future claims and administrative costs are
funded and in the continuing unlimited financial obligation of its
members to MPT.
 Under the MPT claims-paid coverage, a claim remains the
liability of the member (collectively, the "Members' Liabilities")
until the liability for the claim is settled and paid. A claim becomes
an obligation of MPT once it is determined to be an obligation under
the interindemnity contract (i.e., when there is an obligation to
pay the claim). With a traditional insurance policy, the claim is
the liability of the insurance company upon the determination that
the insured has coverage for the particular claim. Under a claims-made
regime, an insurance company must post a reserve for indemnity and
defense costs as soon as a claim is reported. However, in a claims-paid
insurance world, an insurance company needs to post a reserve only
for the defense costs and collect the indemnity expense, through
premiums, in the year that the indemnity will be paid, if ever.
 Each year's assessment process estimates the resources needed
to pay claims and operating expenses for the following year. CAP
had the statutory authority to seek mid-term assessments in the
event MPT's resources are insufficient to meet current obligations.
The accounting treatment of MPT's liabilities follows the "claims
paid" nature of the coverage, and explicitly differentiates
between liabilities of MPT and the Member's Liabilities.
 Although membership in CAP is available to any physician
licensed to practice medicine, admission to MPT is not automatic.
Each prospective physician participant must undergo a rigorous application
and underwriting process, which culminates with a decision by the
Quality Control Board ("QCB") to admit or reject the prospective
member. The QCB is composed of six member physicians who are responsible
for reviewing the application and record of each nominated physician
MPT's processes help insure that only the highest quality physicians
are admitted to CAP and MPT. As a membership organization, CAP may
employ more restrictive selection criteria than other industry participants.
Experience has shown that approximately 84% of all applications
for membership to CAP and MPT would be accepted by QCB, which compares
to the 95% acceptance rate of other California malpractice insurers.
 The CAP Exchange and CAP Attorney discussed initially in
conjunction with FIG. 3a would implement significant state-of-the-art
improvements to the current CAP-MPT claims paid product, as discussed
above. First and foremost, unlike CAP-MPT, the CAP Exchange insureds
would no longer have unlimited liability for assessments to meet
insured losses; instead, for the first time, annual assessments
would be capped. Second, also unlike CAP-MPT, the CAP Exchange claims-paid
policy would be deemed to be insurance, regulated by state insurance
departments, and legally and commercially respected as such, throughout
the United States and in the reinsurance marketplace. Third, as
insurance, rather than in an interindemnity insurance trust, the
CAP Exchange claims paid policy may be acceptable to more physicians,
and could be offered outside of California. Fourth, as claims-paid
insurance, the policy would be able to combine the best elements
of the statutory scheme and insurance law to enhance the security
to the covered entities, such as posting reserves for defense costs
which is not a permitted activity for CAP-MPT. These advantages,
combined with CAP Exchange's lower cost and better loss results
than its competitors' policies, would help CAP Exchange spread the
professional liability risk through increased growth. Fifth, as
in the case of CAP-MPT, the claims-paid format would encourage CAP
Attorney, CAP Exchange and the insured to seek ways to reduce risk.
Better risk management reaps immediate gains to all parties through
lower assessment costs and needs by all parties.
 FIG. 4 is a flow chart of a process for creating a claims
paid professional liability insurance company. An investor group
creates a corporate entity and seeks government approvals, particularly
the licensure to engage in the business of insurance (400). As a
part of this business plan, the investors must decide whether to
create a mutual, stock or reciprocal company and evaluate which
of these structures favors the objectives of the nascent company
(410). If the program is a liability insurance program to be owned
by its insureds, the investors may choose to seek RRG status (520),
but this element is not essential to the creation of a claims-paid
insurance company. Optionally, the organizers may create a separate
membership status for retired/terminated members (530). The organizers
also must retain management and create a claim-paid policy acceptable
for an individual jurisdiction (440).
 Although the present invention has been described and illustrated
in detail, it is clearly understood that the same is by way of illustration
and example only and is not to be taken by way of limitation, the
spirit and scope of the present invention being limited only by
the terms of the appended claims.