[AlexSMF]

Alex is a stand-up guy, and I'm sure he wouldn't bring this to light if he didn't have a preliminary strategy laid out. Try reaching out and seeing what he has to say.

Thanks Zach. Some of you have asked for info on this so here it goes. To start of with, Creditguy is right; since this product does not officially exist yet, there needs to be enough in the pool to make it work. On top of that, as far the research I've done and the feedback Ive received from multiple specialty vehicle product underwriters (including CNA and ex AIG underwriters working at other major companies) trade credit insurance would not necessarily be applicable here for a few reasons that I can elaborate on (primarily due to structure of MCA's and insurance companies appetite for them).

That said, here is how the product works (You should read this if you made any references to "the big short", as this is not."

Lets say MCA company A has a pool of merchants they purchases future revenue from. Currently the amount outstanding to the MCA company is $10,000,000.
The insurance company would write a policy with a general aggregate limit of $5,000,000 and a $50,000 per occurrence maximum, not exceeding 75% of the outstanding amount. Reason for this is to make sure that the MCA company always has skin in the game. (at any point, they are always on the hook for 25%)

Premium can get assessed in a few ways, but the most obvious would be for the insurer to look at the historical default rate on the pool of dollar value of the aggregate limit they are writing. In this case, lets say on a pool of $5,000,000, the historical default rate in past 12 months is 8%, meaning $400,000. In this scenario, the premium would be somewhere in the vicinity of lets say $450,000.

The obvious question here is, why in the world would you pay a $450,000 insurance premium to protect yourself against $400,000 in losses. 2 reasons:
1) You are funded by investors and would like to use this as a tool to reduce the rate you are paying to them (if that is your structure)
2) You are looking to expand your underwriting guidelines in an attempt to capture more of the market but in return you run the risk of running up your default rate. In this scenario, the insurance acts as your safety net.

There are other reasons why you would purchase this, if for example you had good reasons to believe that your default ratio will be going up due to slacking economy, etc... however I would not recommend this product for that standalone reason.

If you are self funded, do not have investors, and not looking to do anything different with your underwriting or new products, then this insurance does not make sense for you, since the insurance premium will always be more than the dollar value of your historical default rate. Don't mean to be long winded here but I a firm believer in transparency and not a fan of having people insinuate that I am looking to get over on anyone. Those who have dealt with me in person would attest to that.

Given the aforementioned, if this is something that is of interest to you, then lets chat. Yes, I need participants to make this work and to give you guys more specifics if what I provided so far isn't enough.