Loss Mitigation

Deal negotiations can run into difficulties where problems have been identified and there is uncertainty surrounding the final quantum of the loss. completely razed to the ground. Particular areas where this may arise is ongoing or pending litigation. Alternatively a company seeking to wind up its captive operations may suffer losses in excess of those forecasted, meaning that it is unable to budget with any degree of certainty.

Using top-rated insurance carriers it is possible to utilise insurance protection to cap a known loss and enable corporate organisations to restructure their balance sheet by transferring a contingent liability in return for a fixed premium.

This approach can be linked to ongoing insurance programs and can compliment alternative funding mechanisms. For those companies operating in a share-sensitive industry this can provide shareholders with confidence in the deal.

What does it cover?
LMP's are tailor-made policies drafted in conjunction with the party’s professional advisors on a case-by-case basis to provide catastrophe cover in the event that a damages judgement is awarded against the insured, which exceeds an independent assessment.

Basic structures include:

• additional excess coverage - where there is a suggestion that the existing cover may be inadequate,
• high level excess coverage - again where there is a suggestion that existing cover is inadequate, however, the insured is prepared to absorb that risk themselves up to a certain level where true catastrophe cover is then purchased.

When may this be required?
In any situation where there is existing or pending litigation including:

• directors' and officers' liability or other securities claims,
• environmental liabilities,
• infringement of third party intellectual property rights,
• employment practices liability claims,
• cover can also be arranged to transfer loss in respect of an entire portfolio.