We have been independent since 2012 and continue to work with  regulated insurance brokers, third party administrators and insurance underwriters designing and scoping out a variety forms of coverages across the globe.

In this post we thought it useful to outline the typical structures and types of coverage we have assisted in underwriting during this time.

Structures can depend on the nature of the risk and the regulatory hurdles:

1. is the Underwriter admitted to underwrite business in that territory? If yes the regulatory path is clear and the nature of a regulated activity will be defined in accordance with local insurance codes; or
2. if the Underwriter is not admitted to underwrite business in that territory they may be able to participate in the risk through reinsurance - in this case the local regulated insurer assumes the regulatory burden; or
3. in the case of the USA a Surplus Lines Insurance Broker can place the business with a Surplus Lines Insurer for which Lloyd's is regulated as a Surplus Lines Insurer in all 50 states; and
4. examination at the point in the contract where risk transfer occurs. To this end regulatory requirements can be simplified where the customer facing exposure is not insurance but instead a warranty or service contract. An insurance contract can be drafted to indemnify an Administrator, Dealer or Distributor against claims they receive from underlying customers on the warranty or service contracts.

The explanation under Point 4, may sound a little complicated, but clearly drafted contract could define parties as:

• Insurer and  Administrator (the Insured), whereby the former indemnifies the latter for warranty contract exposures
• Administrator and Dealer, whereby the former provides the dealer with an indemnity for warranties it sells to its customers

The advantage of this structure reduces the flow of insurance contracts to only one which typically is a Contractual Liability Insurance Policy. Local regulatory requirements regarding point of sale disclosure will be restricted to one contract and will involve two parties both defined as commercial entities, rather than any party being determined as a retail customer.

There are further advantages when you look at the Underwriters return on deployed capital. Whilst every Underwriter will have slightly different ways in measuring returns on deployed capital, the risk is only booked as an insurance contract at the point of risk transfer.

In the case of a conventional insurance contract provided to a retail customer this will be at the point the insurance policy is provided to the customer, inclusive of all underwriting, administration and distribution costs. Whereas with a service contract or warranty these costs will most likely be restricted to underwriting and the minimal distribution costs of wholesale insurance broker needed to issue the Contractual Liability Insurance Policy and collect applicable insurance premium tax.

This can have the advantage of restricting distribution costs to between 5% - 10% of the Underwriters Premium versus 50% to 80% of the Underwriters Premium. In the short this enables the Underwriter to write the business at increased profit margin or to reduce their risk premium.

We are always at hand to explain these structures in greater detail and recommend them where they fit.

We have the ability to reach out to Underwriters who can offer solutions in:

• North America - USA and Canada
• UK
• Europe
• Middle East
• Far East 
• Australasia

We have worked with our network of Underwriters on the following programs:

• Extended Warranty - Auto Vehicles
• Extended Warranty - Heavy Plant & Equipment
• Extended Warranty - Generators
• Warranty - OEM Parts Warranty, Rental Vehicle Indemnity and Deductible Reimbursement
• Buy-Back Guarantees - Residual Value Insurance
• Job Loss Protection
• Road Hazard on Auto Vehicles- Tires, Appearance Protection,  Ding and Dent and Key Protection
• Road Hazard on Recreational Vehicles- Tires, Appearance Protection,  Ding and Dent and Key Protection
• Extended Warranty on brown goods that are relatively light electronic appliances such as computers, radios, audio equipment, televisions and handheld devices  and white goods such as major appliances like washing machines and refrigerators and small appliances such as toasters, coffee machines and blenders
• Guaranteed Asset Protection - Auto Vehicles
• Yacht Insurance

For further information and a confidential discussion please contact Mark Standen:

+44 (0)1322 476 276

+1 315 359 6005

+61 3 638 77044

+44 (0)7427 628 886

+61 (0)490 056 472