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Monday, November 1, 2010
Performance bond service

Mutual & Federal has acquired 40% of Praestar Administration Services, an underwriting and administration manager specialising in performance bonds and guarantee products.

Caroline da Silva, the company’s executive general manager: Sales and Marketing, has been appointed as a non-executive director to the Praestar board.
“We have taken this step to service the guarantee segment of the insurance market in a more professional manner. Praestar management has many years’ experience in these niche markets.”
Retired M&F GM (Financial Director Support) Chris Kemp is Praestar non-executive chairman. Executive directors, who are also the majority shareholders, are Jeff Whindus as MD, with Henry Ansara and Peter Muller.
The nature of this business is that guarantee products may not be offered directly to clients, and intermediaries must always be used. “This does not mean we do not know our end clients”, says Whindus. “Relationships are very important and we get to know them through our brokers, and meet regularly. The decision to go with a particular Underwriting Management Agency (UMA), and conversely for an agency to go with a particular client, is not made on pricing alone. Other influences include the levels of security and collateral required by the UMA from the client, and these can be more appropriately set when we know our clients well.”
He says that this particular line of underwriting has a strong focus on the construction sector. “Activity in this industry has quietened down, particularly as government contracts tailed off after the 2010 Soccer World Cup and tenders for new infrastructural work have not yet been awarded. Nevertheless, Praestar has grown its revenue by six-fold in the last two years.”
As Da Silva comments, “This structure is more cost and time effective than having to establish one's own resources and capabilities in order to write such business. Performance expectations are managed through clear and upfront agreements which specify targets for both parties.”
 

Copyright © Insurance Times and Investments® Vol:23.11 1st November, 2010
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