Every week it seems another law firm or trade group holds a seminar on how to recover as much money from property claims as possible.
In large commercial losses, too many unpredictable, uncontrollable things occur in the gray areas of business continuity.
Ask any risk manager--it's impossible to craft a policy that encompasses all of these gray areas, and to get carriers to pay for them.
Enter a new product--Property Transurance.
"This product turns it around completely," said Bruce Thomas, managing director of Transurance Services LLC, the vehicle of Bermuda-based carrier Arch Insurance Group that's offering the product. "It's almost like taking the telescope and turning it the other way and seeing the stars."
Transurance is in essence the "budget" or "funds," Thomas explained, that can help risk managers deal with the "collateral damage" of a large loss.
Collateral damage could involve marketing, legal or risk management expenses in a business-continuity plan, much of which would be considered discretionary spending by a primary carrier and thus not covered.
Transurance is a way to "supersize" primary coverage, said Thomas, to cover this collateral damage.
The funds aren't chained to a set peril or to specific damage, though.
"There's no strings attached to the proceeds," said Ware Preston, also a managing director at Transurance. "They can be used as a policyholder sees fit . . . to deal with whatever issues they have to recover the business, or get back in the business, or maintain the business, or deal with issues that their customers, suppliers, bankers and employees have that were affected by the event that's covered."
Transurance is tied to the underwriting, adjusting and rates of the original property policy. So no additional slogging is needed to initiate coverage, and transaction and administrative costs are low.
The risk manager must only decide how much Transurance she wants, as a function of a percentage of losses paid under her property policy. Then she pays as premium the same percentage of her property premium. Preston compared it to quota share, but instead of share of, he said, it's quota share in addition.
For instance, if a risk manager sets her Transurance payout to 10 percent of property payouts, she pays a Transurance premium that is 10 percent of her property premium. Clients can also tinker with deductibles and lesser limits.
Transurance will pay out only after the referenced insurance policy, or policies, pays. If the latter payment is held up, the Transurance payment is too.
Clients can buy up to 20 percent of losses paid under referenced property policies, up to a limit of $20 million. To be considered for coverage, businesses must have more than $300,000 in property premium.
Thomas foresaw the product's limits increasing over time as his company and its clients get a better feel for it.
As for clients, as of the end of May, Transurance put out their first quote, but the future should be bright, according to Thomas and Preston.
"It's sort of easy from a judgment perspective for risk managers," said Thomas, "because let's face it, they already believe that insurance has a lot of value for them. This is covering something else, from that same basis."
July 1, 2006
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