RTU works with top quality insurers and reinsurers to develop options for legacy liabilities. Options can range from a novation (true legal finality) to a structured transaction providing balance sheet relief, but less than complete finality. In structured transactions, RTU typically offers sufficient limit to achieve "virtual finality" so that the product accomplishes most of what can be achieved by a novation, but at a reduced price.
A novation provides absolute finality by removing the existing liabilities completely. It is as if the original self-insured arrangement never existed. This result can also be achieved through a deductible buy-back policy issued on the same terms and conditions as the original self-insurance. Because these two approaches take over the unlimited exposure of the original, they are more costly, but are the only way to achieve true finality.
LPT: This is usually offered as reinsurance to the captive or the front company. Under an LPT, the reinsurer assumes responsibility for losses in the same way as a novation or deductible buy-back, but with a limit. Where the limit is sufficiently high, it can provide a fronting company or regulator sufficient protection to allow the release of collateral support. Due to the existence of a limit, absolute finality is not achieved. This approach is most often selected due to lower premium costs.
ADC: This is also usually offered as reinsurance to provide protection against deterioration in the current reserves. An ADC is unlikely to provide what would be required by stake holders such as fronting companies or regulators who are in a position to approve a release of collateral. An ADC is an excellent tool to protect against reserve development, but its value will be limited when dealing with out outside stake holders.
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