Lost Instrument Bond Situation RKA was contacted by a the frazzled lawyer representing the estate of a woman without
immediate family who left an unusual will - over a dozen heirs, none related to the decedent, and over half
of whom lived overseas. These were all individuals who had in some way or other touched her life. Problem A large part of the estate, well over a million dollars in value, consisted of securities for which the
certificates could not be located. Background Prior to issuing a replacement stock certificate, the transfer agent normally requires protection in the
event the “lost” certificate surfaces in the future. This protection ordinarilly takes the form of a surety
bond. Normally, the issuing surety requires indemnification, wherein all of the heirs jointly and
severally pledge to make the surety whole in the unlikely event of a claim under the bond. In this case,
since the disbursements to the heirs differed widely in size and the heirs did not personally know each
other or the executor of the estate, it was impractical for any of them to sign an agreement binding them
to an obligation which might far exceed their inheritance. Solution Working creatively and closely with the estate and the surety, RKA was able to craft a unique solution
acceptable to all the heirs. The solution also substantially reduced risk to the surety company and to
the estate executor. A situation that seemed intractable was resolved, and the instructions of a caring
and committed woman were finally carried out.
Third Party Claims Administrator Situation RKA was contacted by a growing third party claims administration company
(TPA). Seeing an opportunity to substantially grow their business, the TPA acquired another similarly
sized firm. Problem Within a year of the acquisition, the state insurance regulations were
changed by law and the annual bond required by the company increased by 750%. Although the company had been
in business and bonded for decades without problems, they found their business in serious jeopardy as a result
of the increased bond requirement. Background Although the acquisition was already proving to be a smart investment, it
generated a sizeable increase in debt and liabilities and also resulted in a significant "goodwill"
accounting entry. From the traditional view of a surety underwriter and the normal process of discounting
certain assets, the acquisition "moved all the numbers in the wrong direction". Solution Using a strategy developed by RKA, the TPA was able to assemble a package of
amplifying financial information which RKA used to justify a different underwriting approach by the surety.
As a result, not only was the required much larger bond approved, it was secured at a competitive rate.
In addition, a well documented yet simple methodology was established with the surety for future renewals.
A complex bonding situation was resolved, and the company can now grow without undue concerns about bondability.
Arthur J. Gallagher Risk Management Services, Inc. now owns
and operates Robert Keith and Associates, Inc.