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East Midlands Chamber News

Innovative insurance firm shortlisted for award

Leicester-based Ratae PGI Limited was the first company in the UK to offer personal guarantee insurance to directors of businesses.

And within the ten months of launching the product the firm has been shortlisted for the Commercial Insurance Awards Innovative product category.

The Award Ceremony will take place on 5 March, at the Millennium Hotel, Mayfair.

For decades now financial institutions have been demanding personal guarantees from directors in return for lending money on loans, overdrafts, invoice discounting, factoring or asset-based lending.

Personal Guarantee Insurance has taken several years to develop and as well as the expected insurance indemnity aspect, it offers a full support package via a telephone help desk to help businesses avoid the common pitfalls that could lead to problems.

For entrepreneurs looking to establish new venture and existing businesses which are seeking to grow, this insurance offers much more than simple peace of mind.

With years of experience in insolvency and business rescue the directors of Ratae PGI Ltd identified a demand for such an insurance, but also recognised after speaking to the insurance industry that as this type of risk had never been underwritten before, there needed to be a comprehensive support structure for the business being underwritten.

The directors were also mindful that lenders often take Personal Guarantees to keep Directors focused on their businesses and to “lift the veil of incorporation” which some companies seek to hide behind in times of distress.

Hence with the need to report what are termed “notifiable events” built into the insurance, and with back up from Ratae’s extensive and nationwide panel of business advisers, it is fully anticipated that business will be encouraged to take corrective advice as soon as trouble materialises within the business.

From a directors point of view the feedback has been very positive. Giving personal guarantees can be a bone of contention within businesses. In some companies this can cause disagreements between directors of uneven wealth, in others spouses worry that matrimonial homes may be at risk.

For everyone, the need for the money to either launch or develop a business will probably ultimately force the Directors to give those Guarantees.

Indemnified cover starts at 35% of the PG in year one, rising to 50% in year two, 60% in year three, 75% in year four, and the maximum cover of 90% by year five.

A premium of 2.5% of the value of the PG is envisaged at launch plus 6%IPT and an arrangement fee of £200.

Steve Thatcher a Director of Ratae PGI said: “To be recognised by the industry so early is a real coup. Our feedback from lenders and directors alike is that this is a product that has been required for years. With a personal guarantee now routinely required for almost all lending, the qualms over giving the PG could be lessened.

"The insurance provides not only an indemnity but also an attractive business resource in the help desk facility which is on hand to provide advice and assistance in times of potential instability in a business.”

David Chappell, the Finance Director, said: “It is true to say that with all our years of experience in insolvency the most common phrase to hear is if only you had come to us sooner."

Insolvency practitioners first goal is to see if they can save a business and it has become frustrating to see businesses fail because they did not have intervention early enough. This new insurance breaks new ground in that it is designed to promote early intervention which appeals to both lenders and borrowers alike.

“Taking out this insurance will give peace of mind to family members, particularly as family homes are frequently used as an asset to underpin a personal guarantee. It also shows a degree of willingness on behalf of the directors to manage risk responsibly. We believe that this is going to give businesses a shot in the arm at this stage in the recovery, and act as a driver to investment."