Case Study

Large Communications Provider: Collateral Issues

A large communications provider was having ongoing concerns with its casualty insurance carrier regarding the calculation of program collateral requirements. The insured was aggravated with the delay in providing calculations and the lack of detail offered by the carrier. Additionally, while the insured’s independent actuarial study was provided to the carrier, it was never taken into account. The resulting inaction left the risk manager and treasurer with limited ability to plan and they felt handcuffed to the carrier.

Old Republic Risk Management (ORRM) met with the broker and senior management of the insured and agreed to consider the independent actuarial report in determining the collateral requirements. The use of the independent actuarial report supplied the desired transparency for the insured and a better understanding of the total collateral needed to support the program. In addition, ORRM provided a transitional collateral requirement over a three-year period. This allowed the insured to negotiate collateral decreases with their prior carrier as the collateral need ramped up for the new program.

This transitional collateral requirement and the use of an independent actuarial study provided the insured with the ability to plan and fully understand their obligations to post collateral to the casualty insurer. ORRM’s flexibility to its insured’s needs facilitated a solution that was amenable to both parties.

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