In every merger, acquisition or investment transaction due diligence is not just important, it is critical. As a seller anticipate it – your preparation can mean fewer irritations and often increased value. As a buyer, don’t take short cuts – the devil is in the details. Continue Reading →
What lawyers should want when hiring an insurance valuation expert or arbitrator.
Too often when interviewing a prospective “expert” lawyers are led astray by the insurance executive who “has worked in the insurance business for over 25 years” or by the CPA who “has testified on many valuations.” BE AWARE – neither may be up to the task. As an attorney going to trial on an insurance valuation matter you want to know your prospective expert’s response to at least the following questions.
Adapted from “Factors to Consider When Hiring an Expert,” an article by Donald May (Marks Paneth & Shron LLP):
Moat Associates has created a business valuation tool that can be used to estimate the value an independent insurance agency, whether large or small.
Inherent in the establishment of appropriate covenants and conditions should be acceptance of regular financial and operational reviews. These might be as frequent as quarterly in marginal loan situations or when trouble has been spotted. Such reviews should include not just the agency’s financial results but at least annually the owner’s personal financials whether or not personal assets have been pledged against the loan. Continue Reading →
The independent insurance agency business has been, is, and should continue to be, an excellent source of loans for commercial banks, insurance companies and other lending institutions. Blessed by an increasing base of prospects, an economy that demands insurance, social and economic inflation that increases premiums the insurance industry has seen a half a century of uninterrupted growth in premiums.
Compensated by commissions based on these premiums the independent agent has enjoyed a unique opportunity for growth in both his/her agency’s income and its value. While the last twenty years have seen marked shrinkage in the number of independent insurance agencies, the primary cause has been a continuing pattern of mergers resulting in fewer but, overall, larger average sized agencies. Among insurance companies and industry experts this trend is expected to continue. It is this merger activity and the resulting larger agency that provides lenders with the opportunity to build a portfolio of highly profitable, mid-size ($500,000 to multi-million dollar) loans and insurance companies with the opportunity to access sources of larger premium sales. Continue Reading →
By Peter H. Bickford
[Editor’s Note: Peter H. Bickford is an independent counselor and arbitrator to the insurance and reinsurance markets, with particular focus on dispute resolution, solvency, regulatory, agency and operational issues. In addition to being a practicing attorney for over 30 years, he has been an officer of both a life insurance company and of a broker oriented property/casualty insurance and reinsurance facility with line responsibility for contract and claims operations. He is an ARIASUS. certified arbitrator and umpire.
Copyright 2007 by the author. Response articles to this commentary are welcome.]
Arbitration has been a recognized standard for resolving disputes in the insurance industry for centuries, evolving from the need for global commerce to be able to rely on standard business practices and the prompt resolution of disputes.1 Over the past several decades, arbitration has become the preferred means of resolving disputes between insurers and their reinsurers. In this period the number of full-time reinsurance arbitrators, along with the number of law firms, consultants, and other experts specializing in this field, has skyrocketed.2 The arbitration boom has also begun to take hold in other areas as well, such as between insurers and commercial insureds and between insurance companies and their agents, with many insurers now including an arbitration clause in their standard producer or agency agreements. However, this expansion of the arbitration process beyond the reinsurance arena has its critics, and creates special problems for agencies that need to be considered. In his excellent article on the commercial history of arbitration and insurance,3 Continue Reading →
STOP, just for a moment, and answer a serious question:
If you had been hit by a bus last night, what would have happened to the business of your insurance agency?
Advisors, consultants and your peers call your response to this question “Perpetuation Planning.” In its simplicity, this is misleading. What you need to plan is how and for whom to preserve your insurance agency’s value when a “triggering event” happens. And one will happen to you. Continue Reading →
The business valuation of an insurance agency or insurance brokerage requires an in-depth knowledge of the internal workings of an agency and a wide-ranging understanding of the insurance agency environment. Most insurance agency valuation reports are vulnerable because the “expert,” lacking close experience with the insurance agency business, has relied extensively on general information and standard text book valuation methodologies.
Whether one is presenting or cross-examining an expert’s valuation report there are several issues that are important to success. Typically, these fall into the following categories.
Insurance arbitration represents a legitimate alternative to the procedures of formal litigation. Effectively conducted and controlled it can prove to be faster, less costly, more convenient, more private and offer reliance on the judgment of a panel with specific insurance expertise. However, lawyers, party principals and even panels regularly break with many of the insurance arbitration “principles“ and thereby minimize the inherent benefits of the arbitration process.
Simply by following these simple guidelines for a successful insurance arbitration, one can increase the benefits of insurance arbitration for all the parties involved in a dispute.