Portfolio sellers and MLA clients have found that our Officer’s Certificates (“OCs”) can provide significant added value. Based on a diligence review of each policy, MLA can provide certain representations and warranties, which (i) permit potential buyers to have greater comfort with the general risks associated with tertiary policies, thus minimizing the impact any one deficiency would otherwise have on the value of a given policy or portfolio; and (ii) covers the representations and warranties that the seller would otherwise generally be expected to make, thus decreasing the seller’s exposure to certain potential liabilities. In MLA’s experience, these OCs will generally increase the price a buyer is willing to pay for a policy or portfolio.
MLA suggests that the following risks be covered by OCs:
- Presence of insurable interest at policy’s inception
- Unlikelihood of an insurer successfully voiding the policy
- Absence of Fraud or STOLI
- Completeness of the file
- No encumbrances
- No irrevocable beneficiaries
- Contestability period has passed
- Absence of third party rights associated with the policy
- Others on request
The OCs are fully customizable and the reps and warrants made can be adjusted depending on the needs of the client. The OCs are generally created concurrently with buyer’s diligence, after the parties have a sense of what, if any, value such OCs may add to the purchase price ultimately paid to the Seller.