March 1, 1999 by Canadian Underwriter
-based Reliance National, a subsidiary of Reliance Group, has introduced Enterprise Earnings Protection Insurance (EEPI), the first insurance policy designed to protect publicly held companies against earnings disruption volatility and adverse results.
EEPI covers a wide range of circumstances that can negatively impact a corporation’s earnings, such as a decrease in demand for goods and services, an increase in the cost of raw materials, supply chain or distribution problems, weather-related events, natural and man-made disasters or other uncontrollable events that could increase expenses or reduce revenues reducing earnings. If an insured corporation misses its operating earnings target by a certain preset percentage due to losses covered by the policy, EEPI will provide a cash payment above a predetermined amount to cover the earnings shortfall.
The coverage works in conjunction with a corporation’s existing insurance programs and any underlying financial instruments utilized to hedge various risk. EEPI serves as an additional layer of protection against catastrophic property and casualty losses while providing primary coverage for certain financial, operational and business exposures. “The insurance and financial markets are converging, and we are on the forefront of this trend,” says Saul Steinberg, Reliance Group chairman.
Reliance has partnered with Swiss Re and several other financial institutions to provide the capacity and capital market structures necessary to support the program.