WHAT IS IT?
- Anti-Corrosion and Interior Fabric Protection
- Extended Warranties and Service Contracts
- Extended Warranty Refunds Programs
- Financial GAP — Loans and Leases
- Theft Deterrent Systems
- Tire and Rim Warranty
- Home Warranty Products — HVAC and major Appliances
- Property Valuation Warranty
- Cellular Phones
- Home Electronics — Television, Stereo and Counter-Top Appliances
We are always looking to broaden our expertise by providing our services outside of the coverage areas listed above
Risk transfer refers to the structure of the arrangement between Trisura and the warranty administrator. Depending on the administrator’s risk appetite, Trisura will find the ideal solution and customize a program. At one end of the spectrum, Trisura will take very little direct risk on the underlying warranty portfolio. In this case, Trisura backs the warranty administrator, and protects warranty holders in the event that the warranty administrator fails financially. The performance of the underlying warranty program has little effect on the risk assumed by Trisura. We refer to this as a Surety Structure due to its similarity to our surety lines of business. Alternatively, Trisura will assume some or all of the risk of the underlying warranty program, thus referred to as Risk Transfer.
- Trisura works with the administrator to ensure an adequate reserve is set aside to meet future warranty obligations.
- Trisura issues a Contractual Liability Policy to the administrator covering their warranty obligations under the program.
- The risk of the warranty program itself rests with the administrator.
- This can provide a lower cost solution than conventional liability insurance products.
- Programs that generate a minimum of $50,000 fee income per year.
- Administrator has Review Engagement or better Financial Statements for review.
- Administrator has several years’ experience in the field.
- Trisura assumes the Risk in providing you with a competitively priced Solution.
- Traditional approach to insurance.
- Administrators consistently monitored for best practices in both business development and claims settlement.
- Administrator effectively earns a fee or commission for distributing the warranty product and settling the claims related to the program.
- Low limit per contract exposures, large distribution.
- Minimum $250,000 Net Premium per year.
- A large amount of historical data to model must be made available.
- Administrators must have a minimum of 2–3 business maturity cycles of experience.
FIVE THINGS YOU SHOULD KNOW ABOUT WARRANTY PROGRAMS
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.