SIGMA's 2011 Collateral Survey Results

Michelle Bradley, ACAS, MAAA, ARM, CERA, CCIS

In the last quarter of 2011, SIGMA Actuarial Consulting Group conducted a survey of insurance brokers, risk management consultants, and risk management staff of self-funded concerns to participate in a survey regarding collateral.  This survey was similar to the ones conducted by SIGMA in 2009 and 2010.

The goal of the survey was to assess, on a national basis, trends in collateral negotiations, exposures, reviews, arbitration, litigation, and other factors that SIGMA actuaries have been seeing with our own clients since the financial crisis of 2009.  The initial 2009 survey highlighted several trends in increased collateral cost and difficulty securing credit.  The results from 2010 and 2011 indicate that collateral difficulties continue.

Executive Summary of ResultsCollateral Survey
Results of the 12-question survey, which received 159 respondents, largely confirm the trends SIGMA has observed in its consulting practice.  The highlights of the survey show:

  • The percentage of respondents indicating that most of the parameters of the agreement were negotiated prior to the policy inception has decreased since 2009.  In the 2011 survey less than half of the respondents indicated most of the parameters were negotiated.
  • In 2011 there was a significant increase in the number of respondents indicating that their carrier completed a review as scheduled.
  • In 2010 many comments indicated that credit risk assessments may now be affecting collateral calculations in several ways: surcharges, increased risk margins, or reductions in paid loss credits.  This was still an issue in 2011, but was mentioned with less frequency.

The report includes details of the survey, including commentary for each question.  At the end of this report, we present recommendations for improving an entity’s collateral picture, and a list for further reading.

Please download this complete survey analysis, by registering for our free resource portal at:

www.SIGMAactuary.com/resources

For Further Information:

Contact Michelle Bradley, ACAS, MAAA, ARM at 866-228-8279 x 204 or mb@SIGMAactuary.com

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