1. Warranties are Not Always Insurance
With some notable exceptions, warranties are agreements between a warranty administrator and the warranty holder. The agreement can sometimes name the insurance company that backs the program in the event that the administrator fails, but that is not always the case. One exception exists where provincial regulations may require, or market forces may dictate that the warranty program be backed by an insurance company to protect warranty holders in the event that the warranty provider goes out of business. In the provinces of British Columbia, Alberta, Saskatchewan and New Brunswick, warranties are considered insurance policies and additional regulations regarding the sale of these policies often exist. Note that even in these Provinces, some retailers and manufacturers are often exempt from having the warranty treated as insurance.
2. Product Warranties Create Competitive Advantage
Sometimes regulations dictate that warranties for products or services are required, where this is not the case, providing a warranty on your product or service may give you a competitive advantage in the marketplace by providing the customer with additional value.
3. When a Surety Structure is Recommended
The Surety solution is suitable for warranty programs where the warranty administrator wishes to retain the risk of the underlying warranties. Normally, this means that the administrator demonstrates considerable experience and expertise, as well as sound financial position.
4. When a Risk Transfer Structure is Recommended
Trisura has a limited appetite for pure risk transfer in its Risk Solutions business, however programs will be entertained where the administrator and Trisura can align their interests, the administrator has considerable expertise, and the nature of the warranty program is such that the financial risks are tolerable on an aggregate basis.
5. There Is No Substitute for Experience
Warranty programs that can demonstrate many years of experience, and be supported by large amounts of data and actuarial reports are more likely to find an underwriting solution than those with little or no experience.