COAN, PAYTON & PAYNE, LLC IS NAMED A BEST LAW FIRM BY U.S. NEWS & WORLD REPORT IN SEVEN PRACTICE AREAS INCLUDING BANKING, BANKRUPTCY & CREDITOR'S RIGHTS. DID YOU KNOW? Of course, banks in hurricane-prone regions are not the only banks facing exposure to losses from natural disasters. The increase in frequency and severity of natural disasters over the past decade has caused banks to re-evaluate their overall insurance programs and consider forming captives to enhance their coverage. Beyond natural disasters, a captive can also be structured to provide additional coverage for other types of manmade disasters like riots, cyber attacks, and terrorist attacks. Why is Now the Time for Community Banks to Evaluate Captives? In 2021, the 10 largest U.S. captive domiciles saw 95 new captive insurance company formations, which is a significant increase over previous years and an early indication that 2022 captive formations will exceed 2021 numbers. Large U.S. companies have used captive insurance companies for decades. With a hardening commercial market and increased risk of natural and man-made disasters, there are compelling reasons for banks to assess their current commercial insurance and consider future scenarios. Below are some examples as to where a captive could cover unfunded risks: • Commercial premium increases: Along with increasing costs for natural disasters, cyber coverage premiums are up 20–40%, while banker’s professional liability and crime bond premiums have risen 10–30%. • Commercial coverage limits: Higher deductibles, broader exclusions, and sub-limits applied to certain coverages make captives a viable alternative. • Coverages not available commercially: These include reps and warranty coverage for M&A transactions and legal expense coverage for class-action nuisance suits. • COVID claim rejections: While many commercial carriers have denied COVID business interruption claims, KeyState’s Bank Captive Program has settled more than $4 million in COVID claims. David Guerino is Senior Vice President & Managing Director-Captive Insurance for The KeyState Companies, which manages tax advantaged investment and insurance structures for over 130 community banks across the country. He oversees KeyState’s Bank Captive Program, which has been endorsed by 30 state banking associations including the Colorado Bankers Association. WE MAKE IT EASY LET OUR TEAM HELP YOU SECURE THE DEAL AND LOWER YOUR RISK • UP TO 90% OVERALL FINANCING • UP TO 25 YEAR TERM • FIXED-RATE PREFERREDLENDINGPARTNERS.COM | 303.861.4100 Leveraged financing and refinancing of owner occupied real estate and long-term equipment. Most for-profit small businesses eligible. SBA defines businesses with net profit after tax <$5.0 Million and tangible net worth <$15.0 Million as small. 11 Colorado Banker
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