The Gallagher Global Financial Products Practice is designed for our clients that typically require advanced risk management advice and products to address risk problems that the traditional insurance marketplace does not adequately cover.
Drawing from expertise within the insurance, alternative risk and capital marketplaces to create financial solutions, this specialty practice structures creative risk financing solutions and consulting relevant to your diverse needs.
Areas of Gallagher Global Financial Products include:
Structured Insurance Programs are innovative products that address unique client risks. Based on your needs, these solutions may combine insurance, Alternative Risk Transfer (ART) and capital market risk finance techniques. They are generally one-off products customized to address complex or difficult-to-insure risks - alone or in combination with other exposures. It is common for Structured Insurance Products to contain a component of funding by you, structured policy limits and provisions for you to benefit from favorable loss situations.
Examples of risks suited for Structured Insurance Programs include:
- Difficult casualty and product liability
- Financial lines (including Professional Indemnity)
- Medical malpractice
- Capital market-based exposures
- Warranty risk issues
- Construction defects
- Patent infringement
- Trade credit and political risk
Exotic Buyout Programs are structured to help companies and captive insurance companies address corporate risk as well as balance sheet and income statement issues related to extremely difficult and complex risks. The programs involve the assumption of liabilities that have typically developed over a substantial period of time. Ultimately losses and the payout pattern of those liabilities are actuarially determined and valued in present-day dollars. Premiums are then based upon expected losses and the amount of coverage necessary to protect you against adverse loss escalations.
Examples of risks suited for Exotic Buyouts include:
- Medical Malpractice and Hospital Professional Liabilities
- Financial Lines (including Professional Indemnity)
- Asbestos and Occupational Disease Liabilities
- Warranty Liabilities
- Merger & Acquisition-Related Risks
- Captive Insurance Companies
- Public Entity-Related Liabilities
Many industries are susceptible to increased expenses or decreased revenues stemming from changes in the price or volume of a commodity that is critical to their business. The most common contracts are used to hedge earnings risks from commodity price fluctuations within liquid markets (including swaps, caps, floors, collars, options and spreads). However, not all commodities have liquid markets. We structure commodity risk solutions for price fluctuation of both liquid and illiquid commodities through customized financial products and market hedges.
Dual-trigger structures comprise a broad and innovative category of risk solutions that respond to situations in which a firm's underlying risks are based on the occurrence of two or more events. These loss triggers may include some combination of the following:
- An adverse weather event
- Commodity price movement
- A commodity volume shift
- A credit event (bankruptcy or default)
- Interest rate movement
- Property damage or equipment failure leading to business interruption
Dual-trigger solutions are customized to meet the underlying business and risk objectives of the purchasing party. A common dual-trigger structure is a winter peaking solution for a natural gas distributor. For example, a natural gas distributor purchases a winter peaking solution to protect against extra expenses in the market when (1) the next day's winter forecast is below a specified temperature and (2) the market price for natural gas exceeds a given level. The peaking solution enables the gas distributor to meet its clients' increased demand for natural gas during cold stretches without suffering a severe impact to its bottom line.
Corporations, public entities and financial institutions seek financial solutions to:
- Quantify, manage and transfer risk
- Reduce the cost of financing risk
- Minimize earnings volatility
- Maximize regulatory and economic capital
- Improve market and investor perceptions
- Overcome obstacles in mergers, acquisitions or divestitures
- Address legal and accounting issues
- Enhance product distribution and capacity
Our Risk Finance Consulting practice offers a broad range of high-end, technical risk consultation and advisory services. Services are offered on either a stand-alone project basis or as an adjunct to our broker services.
Examples of consulting services we offer include, but are not limited to, the following:
- Risk Management Audits & Surveys are customized around client-specific objectives and typically vary from project to project. We can assess all aspects of a client's risk management process ranging from its administrative functions (such as internal staffing, communications, data compilation and RMIS) to technical coverage wording and risk transfer contract reviews.
- Risk Finance Feasibility Studies focus on the financial side of the client's risk management program. The process involves analysis across a broad spectrum of alternative risk structures, such as insured "cash flow" programs, self-insurance, captives and structured insurance programs. The studies are designed to answer the question: What is our company's optimum risk finance strategy and program?
- We can manage an objective Insurance Bidding process on behalf of non-brokerage clients. This process involves a data-gathering phase similar to that conducted for a risk management audit. Comprehensive insurance specifications containing pertinent underwriting data and coverage requests are then prepared. Simultaneous with the preparation of the specifications, we work with you to prequalify a number of agents/brokers and direct writers to bid on the insurance.
In addition to the above services, we provide consulting for special projects in other areas of expertise including:
- Cost allocation studies
- Assistance with mergers and acquisitions due diligence reviews
- Review of lease agreements and other contracts for risk management implications
- Cost of risk analysis/benchmarking analysis
- Risk identification surveys
- Insurance coverage audits
- Preparation of insurance specifications and evaluation of proposals
First established for energy and agricultural companies, weather and commodity risk solutions are now being used by companies across industry groups to:
- Reduce revenue fluctuations
- Control extra expenses
- Stabilize earnings over a multi-year period
- Increase shareholder value
- Prove stability to rating agencies and the investment community
- Secure financing for business development projects
- Gain a competitive advantage
Weather risk solutions protect firms from increased expenses or decreased revenues stemming from adverse weather conditions. Weather risk products can be structured in various forms, including derivatives and insurance, depending on your particular need. Adverse weather conditions can include unfavorable temperatures, rainfall, snowfall, streamflow, wind speed or any combination of these events. Weather derivative or insurance structures enable companies to stabilize weather-based earnings fluctuations for short events, seasonal peaks or multi-year business periods. Firms in weather-influenced industries gain a competitive advantage over the volatile results of non-hedged competitors.
Industry groups subject to weather risk include:
- Energy (e.g., generators, distributors, and wholesale sellers and buyers)
- Restaurants, hotels and others in the entertainment business
- Railroads and other transportation providers
- Agriculture industrials (e.g., steel, paper and pulp, and food processing)