Specialised risk financing provider, 1970 Group has developed a solution to help release trapped liquidity on insurance corporations’ balance sheets.
Insurance Collateral Funding – the name of the solution, is a first-of-its-kind which enables companies of all sizes to transfer their insurance collateral requirements, which can be up to the tens of millions of dollars.
This solution from 1970 Group is designed to give companies more capital to deploy to business operations and investment opportunities.
Developed by a group of executives with wide experience in insurance and finance, 1970 Group began providing Insurance Collateral Funding to corporations in 2020.
In addition, 1970 Group works with companies in the US and Canada across all business sectors, with a core focus on workers’ compensation, commercial auto and general liability.
Because of insurers’ requirements that collateral is to be set aside to cover deductibles, this often causes for companies to tie up substantial amounts of capital by putting cash in escrow, or more typically signing letters of credit directly with banks, which reduces the amount available under their credit facility to run and grow their business.
Many companies lack easy access to alternative funding solutions, and the Insurance Collateral Funding offering is designed to fill this gap in the market.
This financing need ranges from hundreds of thousands, to hundreds of millions of dollars, depending on the overall size and nature of the business itself.
In a press release, it states that 1970 Group has established a “sophisticated capital structure”, backed by partnerships with leading banks, investors and distribution partners.
1970 Group works with a network of partner banks to issue letters of credit on the behalf of a company, in order to satisfy insurer requirements.
Furthermore, the collateral requirement then gets transferred from the company’s balance sheet, ultimately freeing up the insured’s credit facility, providing them access to liquidity, and expanding their leverage capacity.
Another key benefit from Insurance Collateral Funding is the insured’s accounting choice to structure 1970 Group’s solution as an on-balance sheet or off-balance sheet financing.
Chairman and Chief Executive Officer of 1970 Group, Stephen Roseman, commented: “After years of increases, commercial insurance prices are only continuing to climb in 2022, driving more companies to adopt high deductible plans and insurance providers to require more collateral.
“We often hear from industry-leading brokers that their clients need help in addressing this insurance collateral pain point. Our Insurance Collateral Funding solution provides an opportunity for CFOs and risk managers to unlock more of their balance sheet. It also gives an opportunity for brokers to add value in their relationships with these companies by offering a balance sheet and liquidity management solution alongside their risk management products.”
