What are Third Party Administrators "TPA's"?

This term is now commonly used in "CGL" (commercial general liability) policies or so called "casualty" business. In these instances the liability policies are written with a large (usually in excess of $50,000) "SIR" (self insured retention) that operates somewhat like a deductible, but rather than being paid at the end of a claim (when a loss payment is made to a claimant) the money is paid up front by the insured for costs, expenses, attorney fees etc. as the claim moves forward. If there is a settlement or verdict within the SIR then that is also paid by the insured up to the limit of the SIR, before the insurer steps in and pays its portion. The Third Party Administrator acts like a claims adjuster for the insurance company and sometimes works in conjunction with the inside insurance company claims adjuster or an outside claims investigator as well as the defense counsel. The defense counsel in some situations is selected by the TPA. The point is that the larger the SIR the more responsibility the TPA (third party administrator) has over the control of the way the claim is handled and ultimately resolved. Some self insured retentions are in the millions of dollars and the TPA's are large multinational non-insurance entities that handle all the claims. In some cases the insured sets up an entire department within their company (and staffs it with claim savvy people) to act as the TPA as opposed to hiring a commercial TPA company.