Products

Non-Payment Insurance MGU for Banks and Others through Applied Risk Capital

One of the only markets insuring individual non-investment grade credits against default

The product focuses on the difference between “probability of default” and “loss given default”

Typically insures non-investment grade senior secured bank loans against default (non-payment)

• Very important product for banks lending to sponsors for acquisitions
  • Often used by the bank without the sponsor’s knowledge
• Focus is on single B credits (internal rating by bank)
  • Premium is less than the credit spread difference between single A (rating of insurance) and single B (rating of loan)
• Insurer is typically pari-passu with the bank on a quota share basis
• Insurance provides capital relief for non-US banks operating in the US
• New US bank regulations proposed by Federal Reserve (Reg Q changes), if adopted, will enable US banks to also recognize capital relief
  • Per borrower limit of ~ $ 40 mm

Product can be “reverse engineered” by the borrower, introducing the MGU to the bank

• Can apply to letters of credit, surety, expansion of credit facilities, etc.

“Transformer and Fronting Carrier” through DP-ARC Bermuda

DP-ARC Bermuda is an S&P A rated Bermuda-based insurance company primarily focused on non-payment insurance written by Applied Risk Capital

• It is more efficient for the carriers currently supporting Applied Risk Capital to act as reinsurers than primary carriers; DP-ARC Bermuda will act as the primary carrier for Applied Risk Capital, enabling the current primary carriers to act as reinsurers (i.e., a ‘transformer” vehicle)

DP-ARC Bermuda will have the ability to act as a primary carrier in the UK which creates additional revenue opportunities

• One of DP-ARC Bermuda’s reinsurers currently writes a material amount of premium as a carrier in the UK but is not licensed in the UK to write insurance as a primary carrier. As such, this carrier works with a UK-licensed “fronting carrier”
  • DP-ARC Bermuda will become the UK fronting carrier for this insurer and others

Law Firm Loans through JBSL Legal Finance

JBSL originates and syndicate large, structured, non-recourse loans to large mass tort and other law firms in the U.S. and facilitates secondary market trading of litigation risk

• JBSL makes loans collateralized only by the cashflow generated by the borrower’s portfolio of contingency fees

As the collateral portfolios mature, JBSL pools various portfolios of contingency fees and creates securities that are sold to investors

Captive Insurance Companies

With few exceptions, writes low-frequency, high-severity risk with material subrogation rights

Largest exposure is to portfolios of legal assets insured for “minimum amount of cash received over a fixed number of years” (e.g., at least $100 mm cash received by insured from their legal asset portfolio within 4 years)

• Limit is typically less than half of the market value of the collateral (i.e., legal asset portfolio)
• Assets in the portfolio can be sold by DPRMS in the event of a claim to reimburse DPRMS and its reinsurers

Virtually all risk has been sourced by CAC

Investment Bank for Financings

Dorset Peak Securities is the regulated investment banking entity that enables Dorset Peak to execute a broad range of financing, structuring, and financial advisory transactions

We are a leader in our ability to efficiently finance against insured assets, especially legal and other contingent assets

• We often finance against different types of contingent/legal asset policies, including judgement preservation (typically PIK financing with an uncertain maturity), portfolio policies insuring cashflow over a fixed period (partial PIK financing with a fixed maturity), and portfolios of policies for back-leverage (mostly cash-pay with a fixed maturity)
  • Back-leverage is when a lender creates a portfolio of similar credits and borrows against the portfolio (analogous to a margin loan against a stock portfolio)
• While our primary focus is financing against insured assets, we have the full ability to execute traditional financing and financial advisory transactions (but are very selective in accepting mandates)