Insurance Services
Holistic Wrap for Protecting Investment Projects
Provided in Partnership with First Choice Insurance Intermediaries, H. Timothy Breen - Executive Vice President/Partner
1. Objective:
To construct a cost-effective insurance wrap for infrastructure investments that will provide lenders with acceptable security for their participation.
2. Background:
Financial guaranty insurers, save one, no longer exist. The one guaranty company that does exist has limited scope, and often premiums are cost prohibitive. Typically, retail and reinsurance Property/Casualty insurers have not written and do not write financial guaranty insurance.
3. The Alternative:
Utilizing large, multinational commercial insurance companies with a full suite of Property, Casualty, and Surety products can provide investors with a solution for their security requirements. By leveraging premium dollars for all lines of coverage, in concert with long term agreements including elements of self-funding, a structure can be developed which encompasses all exposures to risk of loss, physical loss, third party loss, and credit loss.
4. Coverages:
Each investment project would be assessed for the use of traditional commercial insurance coverage. These coverages include but are not limited to: Property, Business Interruption, Third Party Liability coverage, and Political Risk coverage including Credit Risk protection.
Additionally, an assessment would be made of the financing transaction itself, be it a loan or lease structure, determining the maximum exposure to loss resulting in payment default. The length of the lease or loan would also be analyzed to determine what insurance term requirements would most efficiently provide certain payment protections. These protections would likely be provided by a surety bond or bonds known as Lease or Guarantee of Payment Bonds.
To facilitate concurrence with financing terms, the following features will be considered:
a) Structuring insurance contracts and surety bonds on an “Until Canceled” basis, to be continuous in nature.
b) Building the insurance and surety constructs within “time tranches” that would match certain performance triggers agreed upon with lenders.
c) Filling certain risk levels with self-funded segments that would provide the projects with the most cost effective risk transfer system, as well as filling gaps in coverage that may arise. (This could be done through a captive or rent-a-captive program affording both the lender and the lessor or borrower a most cost effective mechanism by which to fund certain risks or segments of risks.)
5. Next Steps:
Provided in Partnership with First Choice Insurance Intermediaries, H. Timothy Breen - Executive Vice President/Partner
1. Objective:
To construct a cost-effective insurance wrap for infrastructure investments that will provide lenders with acceptable security for their participation.
2. Background:
Financial guaranty insurers, save one, no longer exist. The one guaranty company that does exist has limited scope, and often premiums are cost prohibitive. Typically, retail and reinsurance Property/Casualty insurers have not written and do not write financial guaranty insurance.
3. The Alternative:
Utilizing large, multinational commercial insurance companies with a full suite of Property, Casualty, and Surety products can provide investors with a solution for their security requirements. By leveraging premium dollars for all lines of coverage, in concert with long term agreements including elements of self-funding, a structure can be developed which encompasses all exposures to risk of loss, physical loss, third party loss, and credit loss.
4. Coverages:
Each investment project would be assessed for the use of traditional commercial insurance coverage. These coverages include but are not limited to: Property, Business Interruption, Third Party Liability coverage, and Political Risk coverage including Credit Risk protection.
Additionally, an assessment would be made of the financing transaction itself, be it a loan or lease structure, determining the maximum exposure to loss resulting in payment default. The length of the lease or loan would also be analyzed to determine what insurance term requirements would most efficiently provide certain payment protections. These protections would likely be provided by a surety bond or bonds known as Lease or Guarantee of Payment Bonds.
To facilitate concurrence with financing terms, the following features will be considered:
a) Structuring insurance contracts and surety bonds on an “Until Canceled” basis, to be continuous in nature.
b) Building the insurance and surety constructs within “time tranches” that would match certain performance triggers agreed upon with lenders.
c) Filling certain risk levels with self-funded segments that would provide the projects with the most cost effective risk transfer system, as well as filling gaps in coverage that may arise. (This could be done through a captive or rent-a-captive program affording both the lender and the lessor or borrower a most cost effective mechanism by which to fund certain risks or segments of risks.)
5. Next Steps:
- Review the basic requirements of the lender(s).
- Review terms of the project financing.
- Review exposures and financial projection.
- Initial review with insurers including, but not limited to: Travelers, Zurich, CHARTIS, Munich RE and ACE.