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Pooled Securities Program Through FTN/KBW

FTN Financial Capital Markets (FTN) and Keefe, Bruyette & Woods (KBW) together pioneered a securities pooling program to enable small and mid-size insurers to issue surplus notes in a streamlined, cost effective manner. At inception in 2002, the PreTSL pooled capital program was a breakthrough structure designed to provide access to surplus for insurers via the capital markets. Up to that time, such access had previously been available only to the largest companies. However, by combining multiple surplus notes (and similar securities) from a number of issuers into a single, large scale securities transaction, the FTN/KBW team is able to offer institutional investors a diversified pool of risk and at the same time offer efficient capital markets-type pricing to our insurance clients.

The program is designed to be as simple as possible for insurers. Rating agency review, due diligence, document preparation, and materials for state regulator approval are all streamlined as much as possible by the PreTSL team.

Surplus notes are a form of regulatory capital, and are additive to A.M. Best's BCAR calculations, making them ideal for enhancing an insurer's capital and leverage ratios. NAMIC members have utilized the program to raise capital for many reasons, including:

  • Protecting and enhancing key capital and leverage ratios
  • Boosting surplus to keep pace with growing premiums and/or new markets
  • Reducing dependence on quota share, first working layer, and catastrophe reinsurance
  • Financing acquisitions or major capital expenditures
  • Replacing senior debt or bank lines with permanent capital

Exclusively endorsed by NAMIC, the PreTSL program has raised in excess of $400 million for NAMIC member companies. NAMIC has recognized the FTN/KBW team as leaders in this area, and the program's track record has met expectations. Key aspects of the PreTSL program include providing regularly scheduled, dependable capital access to members in amounts as small as $2 million, assisting member companies in achieving first time regulatory approvals for surplus notes, and working closely with companies and A.M. Best to evaluate the prospective impact of new surplus on insurers' capital adequacy ratios.

"Our partners bring the strongest track record of success.they issue when they say they will issue, and price at the level they say they will price. In short, they do what they say they will do," said NAMIC President Chuck Chamness. "For that reason, NAMIC is recommending this program as an option for member companies who may be seeking additional capital to strengthen their capital and/or expand their operations."

A new PreTSL pool is constructed each quarter, but the FTN/KBW team also provides warehousing arrangements for faster access to capital when needed.

Learn more about FTN.

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