Posted on 10 Aug 2010
As risk managers continue to navigate a challenging collateral landscape, Marsh, the world's leading insurance broker and risk advisor, has established a new Collateral Solutions Group (CSG) to ensure that all clients consistently receive the best possible collateral terms and most appropriate solutions to meet their individual needs.
The new group is comprised of more than 30 senior casualty experts from around the firm who, in partnership with several leading banks, MMC Securities Corp., and Marsh Business AnalyticsSM, will help clients achieve the best collateral outcome.
"Collateral requirements have become an increasing burden for our clients and prospects with loss-sensitive insurance programs as credit markets have tightened and collateral costs have increased,” said David W. Karr, Managing Director and Co-Chair of the Collateral Solutions Group.
"This burden has been particularly notable from the point the financial crisis began almost two years ago and remains prevalent today. We don’t see any indication of these trends reversing.”
Insurers require risk managers with loss-sensitive programs, such as commercial auto, general liability and workers’ compensation, to post collateral to guarantee payment of claims falling within large deductibles. However, due to the capital constraints associated with current economic conditions, banks have materially reduced credit facility capacity, increased letters of credit fees, and, in some cases, required cash collateral to secure a letter of credit. At the same time, insurers also have become more conservative in their collateral requirements in order to protect themselves from the credit risk associated with loss-sensitive programs.
"Against these headwinds, our clients are increasingly under pressure from their senior management to rein in collateral requirements in order to reduce costs and free up capital for other corporate purposes,” said Daniel E. Aronson, Managing Director and Co-Chair of the Collateral Solutions Group. ”With the establishment of CSG, Marsh is taking collateral solutions to the next level and providing clients, including those in financial distress, with real solutions to address their real needs.”
Toward this end, CSG’s initiatives include:
? maintaining senior level relationships with carriers’ credit risk personnel;
? actively monitoring each carrier’s collateral requirement underwriting guidelines and acceptable collateral instruments;
? developing analytic models that will compare and contrast insurers’ collateral requirements based on different scenarios, including the long-term impact of switching from one carrier to another;
? dedicating specific resources to loss portfolio transfers and other deductible closeout strategies; and
? partnering with leading banks and MMC Securities to develop alternative collateral facilities.
"We are currently finalizing two new collateral products for eligible clients and prospects that bring completely new solutions to this market,” Mr. Aronson said.
"The Collateral Solutions Group is a tangible example of how the Marsh Casualty Practice brings together our formidable resources to tackle key issues affecting our clients and offer them industry leading solutions,” said Jonathan Zaffino, Marsh Global Risk Management Casualty Practice Leader.