Fixing the Insurance Collateral Crunch
The use of insurance collateral to bolster financial liquidity is not a novel concept.
Well-run companies that would rather devote resources to buying new equipment, acquiring another company, or hiring top-notch talent, would frequently turn to letters of credit or sureties to cover collateral requirements for insurance obligations and loss exposures.
But what worked well enough, say, 15 years ago, is not effective anymore. One important factor is that in the wake of the financial crisis of 2007-2008, banks are much tighter with their lending requirements. This has put increasing pressure on financial officers, and their insurance brokers, to find efficient solutions that can keep the vital taps of liquidity open and flowing.
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