How Private Equity Firms Shop For Insurance With Regards To Portfolio Companies

A private equity firm has a responsibility to choose the best insurance for their firm. This means looking at the various portfolio companies and what insurance they have in place as well. The goal should always be to have quality insurance policies in place to provide the necessary financial protection. As such, there are various aspects to examine.

The Investment Strategy

When it comes to portfolio companies, they are chosen carefully by a private equity firm. Once you have chosen companies you are comfortable with, it’s important to continue to provide support, and this means looking at your insurance and theirs.

There are going to be new investment strategies that you may want to employ going into 2017 because of the Trump economy. You may not necessarily want to change the market you have always invested in as there may be an initial jump, but it will return to what it was prior to election soon enough.

Many investors are choosing to “hunker down” to see just how the market changes because more volatility than previous years is expected. This may not be the time when you want to change up the companies in your portfolio. Instead, it may be best to add resources to ensure that they are stronger within the marketplace and therefore more stable.

Types of Insurance Needed

The type of insurance you need is going to depend heavily on the structure of your business – and the structure of the portfolio companies that you are invested in. You have decisions to make, though you can work with an insurance company that will help you manage the risk by recommending various policies.

Business insurance is going to help minimize the risks that are in place with doing business on a daily basis. This includes:

Commercial property
Business casualty
Directors & Officers
Employment Practices
Executive Liability
Professional Liability
Risk Management
Workers’ Compensation

Each type of insurance is going to protect against different potential threats. There is no “one type” of insurance that is going to protect against everything and therefore it’s good business planning to ensure you have all potential issues covered. Otherwise, the financial ramifications of one issue could send you (or one of your portfolio companies) for a complete loop and ultimately cause financial ruin.

For example, it is the commercial property insurance that will protect against theft and damage to your property. Meanwhile, business casualty insurance is a form of liability insurance in the event you act illegally or irresponsibly, signed a personal guarantee, or don’t operate your business as a separate entity from yourself.

You should also have Directors & Officers Insurance when there is a board of directors. They are responsible for making a lot of decisions and you may have to deal with someone suing them as it relates to the duties within the company. Employment Practices insurance will also help to limit your exposure in terms of discrimination and harassment suits.

Unfortunately, no company is without their risks. This is why there are so many forms of insurance. You need to ensure that you not only have the best policies in place, but also from the top insurance carriers. It will help to provide more of the financial protection in place so you can run a private equity firm and get a good night’s sleep every night.

Overall Stability of Insurance Carrier

There is an economic impact on insurance carriers that you need to be aware of. Some of the firms that charge less in premiums are also covering less liability. They may do this because they are not financially stable. They may have a chance of default. Further, they may be controlled by shareholders and the desire to receive a good shareholder return every year. As such, it is the individuals and firms who use the insurance carrier for their financial protection that suffer in the end.

You can use a website like A.M. Best to determine the financial stability of the company along with the overall news regarding the company. It will make it easier for you to analyze the company for all its worth and determine if that is the carrier you want to go with for your insurance products.

You can also work with an experienced insurance agent to learn more about the best companies for you as a private equity firm. A professional agent can help you choose quality insurance products to have in place for your firm as well as which ones can be recommended for some of your portfolio companies in the event that you question that they have enough financial protection in place.

It’s important for your own company’s risk to be assessed, followed by the risk of the portfolio companies. Solutions can then be provided so that as much of the risk as possible can be mitigated.

Remember, it is all about creating a sound investment strategy. Sometimes, it is up to you as an investment firm to help the portfolio companies that you have. An insurance policy can provide a lot of financial protection and this will make it easier to eliminate a lot of the risk that is in place. Otherwise, one of your leading portfolio companies could be one accident, natural disaster, or lawsuit away from complete financial ruin, which would have a negative impact on you as well.

Learn more about the insurance products for a private equity firm by contacting Surmount Insurance Services today. You can receive a risk assessment and then proceed towards protecting your investments.

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