Each of these questions will hyperlink down to the question/answer.
How important is risk management business to ACE USA?
Risk Management products are mainstream products for ACE USA client profiles. Our presence in the marketplace will continue to grow both on a US and Global basis. Our expectation is the more and more companies will expand their alternative risk product purchasing over the next decade. ACE is well positioned to support that need across a multitude of industry classes and program structures for their worldwide exposures.
What classes of business do ACE prefer to write/not write?
ACE Risk Management supports a wide variety of industries - with very limited exceptions. To find out if we can support your program structure and coverage needs, please go to our “Contact Us” page to find a Business Representative in your territory.
What are ACE Risk Management’s minimum administrative-only fees?
ACE’s administrative fees generally have a start up minimum which depending on product line can start as low as $75,000. However, for most of ARM’s product segments, the minimum range is $100-$125K range. These fees does not include any element of risk transfer on a per occurrence/accident or aggregate basis.
Will ACE entertain “administration only” program structures?
Yes, ACE Risk Management does offer administration- only arrangements for General Liability and Automobile Liability coverages. Generally, they are offered in conjunction with a Workers Compensation risk financing program structure, but will be considered stand alone on a case-by-case basis.
Will ACE offer claims-handling service on an unbundled basis?
Absolutely. A key differentiator for ACE Risk Management is our ability to offer clients a bundled and/or unbundled claims handling program structure.
Does ACE Risk Management support program or association business?
ACE Risk Management is not currently supporting program or association business on any type of risk financing or captive program structure.
ACE USA does entertain program and association business through our Westchester Specialty Division on a pure risk transfer basis. To learn more, go to www.acewestchester.com
Can ACE Risk Management or its affiliates support my exposures in Canada and Puerto Rico?
Yes. ACE Risk Management’s affiliates in Puerto Rico and Canada can accommodate these exposures in the client’s US Risk Management program. If the client prefers to have these exposures underwritten through an international program, ACE Global Solutions can assist with this election.
From the time of a full submission, how long does it take to receive a quotation?
Risk Management programs are complex in nature and require an extensive underwriting, financial, claims and risk information review. In order to assure a complete evaluation and timely quotation, we suggest a full submission be sent in at least 60 days in advance of the effective date. Larger, more complex accounts should be submitted even earlier.
What is the ACE service standard for policy issuance?
ACE Risk Management strives to complete all new and renewal policies within 60 days of effective date of the policy. We have sophisticated internal metrics to measure our turnaround times for processing policies and endorsements and are constantly striving to improve our processes to minimize processing times.
What are the administration-only fees based on?
Administration-only fees are based on a variety of factors. These fees are partially based on internal costs associated with supporting the program structure ( underwriting, servicing, internal rate of return and use of capital, legal and financial support). Such fees are also based on the existence of other business currently with ACE, due to inherent economies. In addition, administration fees will also be based on limits provided and expected losses within the policy limits, as well as the treatment of Allocated Loss Expenses.
Will ACE accept premiums & fees on an installment basis?
Yes, installments are offered to many our customers for budgeting and cash flow purposes. The structure of installments is based on a financial evaluation of the Insured among other criteria.
How is collateral determined?
Generally, the collateral calculation is based on ultimate expected losses, treatment of allocated loss expenses, policy limits, form (occurrence or claims made) as well as the catastrophic nature or claim volatility of the risk being underwritten. A financial review of the Insured will also be factored into the collateral evaluation. Subsequent program years will have a similar calculation and all the program years that have credit exposure to the Company will be evaluated to determine the total collateral needed for a client.
What happens to collateral when an account has been non-renewed?
Collateral is assessed annually in accordance with our agreements. Depending on line of business there could be a very long tail on the exposure (as with workers compensation.) We would hold collateral to a slightly higher level of confidence than the typical 50% confidence level. The answer here is also dependent on how the parent’s (or captive’s) financials are managed.
What is a captive?
A captive is a company specifically established to insure or reinsure the risks of its owners and sometimes related or affiliated firms and returns underwriting profit and investment income. A captive may be either a direct writer or a reinsurance company. In many jurisdictions the insurance may be regulated with onerous capitalization and reporting requirements.
The use and application of captives dates back to the 1950s and its application grew substantially during the liability crisis of the 1980s. The most typical captive structure is a wholly owned “Single Parent Captive” subsidiary through which the parent company insured or reinsured its own risk.
Today, the term “captive” has expanded to embrace a variety of ownership structures including groups of companies and associations usually operating in the same industry or profession. The shareholders/insureds control and actively participate in the decisions influencing underwriting, operations and investments of the captive, and consequently share in the financial results of the company. Some captives today have acquired an AM Best Rating.
Does ACE support captives or rent-a-captive structures?
Yes. ACE Risk Management supports risk financing structures for : single parent (pure) captives and rent-a-captives. ACE Risk Management will work with third party rent-a-captive or sponsored captives.
ACE Risk Management will work with a captive formed in any domicile the world.
How important are financial ratings in the selection of my fronting company?
Selecting an insurer with an A, A+ or greater rating is highly recommended. These ratings are reviewed regularly by the various rating agencies and are considered to be a key indicator of the financial strength and long term “survivability” of the carrier.
This is particularly important for captive reinsurance, as in most cases, the risks selected for captives are generally considered long tail exposures such as Workers Compensation, General Liability/Products, Completed Operations, and Professional Liability.
To learn about ACE USA Companies’ financial ratings, click here.
What do I need to submit for a financial review?
To perform a basic review, the following information should be submitted to your fronting company for a complete financial review:
- Insured’s most current audited annual report or 10K report
- Insured’s most recent unaudited interim report or 10Q if annual report is older than 6 months
Additional financial or company-related information may be required based on the program structure, coverage, limits or other underwriting considerations..
Why does a company performing only administration need collateral?
No matter the type of risk financing program, the insured and captive are expected to meet all financial obligations including premium payment and loss reimbursement over time. Because of the delayed payment of money (premium and losses) owed to the insurer, these programs are essentially extensions of credit and constitute a financial exposure to the company.
When a fronting company participates in a captive program as an admitted fronting carrier, that company or designated TPA will pay losses and will then seek reimbursement from the captive as these losses are paid over the course of the program. The payment of losses may continue for a number of years in the future for any given program year. No matter the type of program, the insured and captive are expected to meet all financial obligations including premium payment and loss reimbursement over time.
What forms of security or collateral other than a letter of credit are considered acceptable to ACE?
The industry standard for securing credit risk is an irrevocable, evergreen Letter of Credit. Other alternatives are:
Parental Guarantees provided by a financially sound parent company may assist in reducing the overall collateral requirement.
How do I know if my bank will be approved by ACE for a letter of credit?
Each insurance company will have its own established guidelines which outline the acceptability of a financial institution for the issuance of Letters of Credit.
At ACE USA, our guidelines require the issuing bank to have total assets in the amount of $5B or greater and must satisfy at least two of the three following minimum rating requirements:
- Fitch Long Term > A and Fitch Short Term = F-1
- S&P Long Term > A and S&P Short Term = A-1
- LACE Financial > B
In addition, ACE USA limits the concentration of letters of credit with a particular financial institution.
In the event the insured's bank does not meet the rating or asset size criteria, a bank meeting the acceptability criteria must add it’s confirmation to the issuing bank’s LOC.
What kind of agreements will I need to sign with ACE Risk Management?
At ACE Risk Management (as with any insurer of loss sensitive programs or ceding company) has standard agreements that address the terms of the contract and related collateral for a variety of product designs. These agreements must state that collateral must be in an amount, from an issuer, or with a custodian or trustee acceptable to the fronting company. They must further provide for the maintenance of collateral in an amount, from an issuer, or with a custodian or trustee acceptable to the fronting company.
Since alternative risk programs can vary widely in structure and contractual relationships, there could be additional agreements associated with a specific program design.