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New Property Cover Transurance Can Provide Flexibility
(BestWire Services Via Thomson Dialog NewsEdge)
The Risk and Insurance Management Societys annual conference provides a launching platform for new products.
One of them, this year, was Transurance, a product launched by Arch Insurance Group thats designed to supplement traditional property insurance, funding costs that are consequential to a covered property loss, but not covered by property insurance policies.
So, if theres a company out there and they have to pay bonuses to managers who are working around the clock to bring something back on line or not leave to go to a competitor, or they have to do something special for their suppliers or distributors because those people are wondering whether they are still going to be in business, this coverage gives them some money to do those things, said Bruce Thomas, the president and chief executive of Risk Innovations, who designed the product along with colleague L. Ware Preston III, a year after they introduced the concept.
Thomas, most recently a senior vice president at Marsh, said risk managers have gotten to the point where they say it doesnt make sense to build in to the basic indemnity-style policy, coverage that is based on things that are largely discretionary. What theyve told us is theyd like to have more coverage and are willing to pay for it, but they want to make sure they get it, he said.
The key idea here is to get rid of the discretion element, said Thomas, who attended the recent RIMS 2006 conference in Honolulu.
The other selling points are: Transurance is significantly cheaper than conventional insurance, if it is sold at the same rate as the underlying insurance, due to the buyers expense savings. Second, buyers have the freedom to select the level of coverage that they feel is most appropriate. They can opt for greater or lesser Transurance coverage based on how the purchase relates to their underlying insurance structure and their desire for collateral loss protection.
And finally, Transurance creates a new source of risk capital for insurance buyers. To the extent that companies buy Transurance from insurers other than the same companies who are providing their traditional insurance, Transurance can help diversify the policyholders credit and counterparty risks.
All it takes to trigger Transurance is a loss paid under the insureds property insurance policy, Thomas said. The insured is then paid an agreed-upon percentage of this amount, excess of the Transurance deductible up to the policy limit.
Coverage is available to businesses of all types with property insurance premiums exceeding $300,000 or a minimum Transurance premium of $30,000.
Preston said there are more than 20,000 companies in the United States that fit into this category, and they intend to reach this target market through a network of brokers, particularly those that specialize in surplus lines products.
(By David Dankwa, associate editor, BestWeek: David.Dankwa@ambest.com)
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