Transactional Liability and Other
4.1 Leveraging Receivables
Lenders view asset classes as having some value when determining the amount of both capital loans and operating lines of credit. Lenders also view insured assets as having a higher value than uninsured assets. Insured receivables can provide a sizeable bump to your operating line of credit. Lenders do not need to exclude foreign buyers, past due balances or concentrations of risk when calculating margin requirements. The larger accounts receivable pool can also be margined at as much as 90% of the increased pool value. Access to additional working capital will allow you to expand your business sooner rather than having to wait for customer payments.
4.2 Risk Transfer
Almost as soon as you have shipped product or provided services to your customers on credit terms, you lose control of the repayment cycle. Choose how much risk you want to hold and how much you want to transfer by insuring your accounts receivable balances. We recommend insuring accounts above an established credit threshold or accounts in a distant location so that you can concentrate on growing your business. Your trade credit insurance policy will guarantee continued cash flow should a repayment problem arise.
4.3 Sales Expansion
You limit credit to customers to minimize the downside risk of non-payment. When you limit credit to your customers, you are turning away sales and more importantly, you are turning away profit. Insuring customer credit allows you to increase sales safely. The cost of insurance will be far less than the profit margin you leave on the table when you hold credit lines. Grow your business and grow it safely when expanding into new geographic areas or when introducing new product lines. Trade credit insurance can provide the backstop you require when entering new markets or selling to new customers.
Other Important Coverage
Our professional risk practice offers a comprehensive program spanning many different areas of coverage for various industries, professionals and businesses. Included herein are key insurance coverages that may suit your needs and those of your practice, particularly in this rapidly-changing global environment.
5.1: Cyber Liability
Cyber insurance policies protect businesses against internet-based risks including data breaches and other cyber-attacks on intangible assets such as private information and computer software.
Generally, commercial liability and property policies will exclude cyber liability as they are designed to cover only bodily injury or damage to tangible property. With the significant increase in cybercrime over the past few years, business owners and entrepreneurs should always have a risk management and emergency response plan in place in the event of a cyber-attack. If your company uses technology that holds valuable client data, company information or you conduct business online, cyber insurance is a fundamental coverage for your business.
5.2 Transactional Liabiity (IPO, Mergers & Acquisitions, Reps & Warranties)
M&A insurance products are customized for the potential liabilities that arise out of corporate transactions. These products can be purchased by either the buyer or the seller, dependent upon where the liability rests in the underlying transaction. We can utilize these products to help facilitate deals, remove obstacles to transaction completion, or unlock funds otherwise reserved against potential liabilities. There are also instances when they can be used for general corporate purposes, particularly for tax and litigation related issues.
- Reps and Warranties Insurance
- Tax Opinion Indemnity Insurance
- Litigation Containment Insurance
- Directors/Officers Indemnification pre/post transactions
- D&O Liability Run-off Insurance
- M&A Pension Plans Liability
- IPO Liability Insurance
5.3 Franchisor risk: D&O, E&O, EPL and Fiduciary
Franchise insurance programs can include a number of coverages designed specifically to address exposures impacting the franchise operations. These coverages include Directors & Officers Liability (D&O), Franchisor’s Errors & Omissions (E&O), Employment Practices Liability, Employee Benefits, Fleet Auto, Property, Liability and Business Interruption.
Policies are available for both the Franchisor and Franchisees. Depending on the franchise agreement, Franchisees may be obligated to place a pre-determined insurance package which may offer competitive group premiums. Alternatively, Franchisees may need to secure a program based on individual risk assessment and tolerance, as well as third party contractual obligations.
Due to the nature of franchise operations, Franchisors commonly face risks with blended elements of D&O and E&O. The rendering of services by a Franchisor to the Franchisees may result in liability should a Franchisor fail to comply with their representations and responsibilities pursuant to the terms of the franchise agreement. These services may include advertising; training; assistance with franchise site selection; lease negotiation support; preparation, registration, renewal or amendment of Offering Circular and Disclosure Documents; and the development and monitoring of standards, specifications and operating procedures.
Given that virtually all franchise relationships will come to an end -- whether expiring naturally at the end of their terms, or by more contentious circumstances such as termination or rescission -- it is important that Franchisor programs respond to Franchisee grievances to the greatest extent possible.
Franchisors and Franchisees collectively strive for successful business enterprises, and effective risk management programs addressing their respective exposures can enable the parties to focus on their shared goal and capitalize on their investments.
Trade Credit Insurance
Trade credit insurance, sometimes referred to as accounts receivables insurance, covers the unpaid credit balance from merchandise shipped or services rendered to your customers in the event they cannot pay due to insolvency. Past due or slow paying accounts may also be included in policies. Political risk exposure, currency inconvertibility and contract cancellation may also be covered.