A diversified forest products company had experienced significant property and boiler & machinery losses over a period of many years. To make matters worse, underwriting experience was not profitable and carriers consistently increased premiums. The client increased efforts to control losses and, as a result, began to see an improvement in their loss experience. However, since the underwriting community was conditioned to the client's past experience, it considered the reduction in losses to be a temporary condition.

Moreover, when the client was willing to accept higher retentions in exchange for premium reductions, underwriters were unwilling to grant significant premium credits because of the client's past loss experience.

Marsh was able to structure a Finite Risk transaction that included a blend of funding and risk transfer to replace the entire primary layer of coverage. This enabled the client to save several million dollars in annual paid premium, in addition to receiving significant return premium if their loss experience remained good over the three-year term of the policy. Additional premiums were capped, resulting in significant risk transfer. The transaction passed IRS tests for tax deductibility, which proved to the underwriting community that their improved loss experience was, indeed, due to their loss control efforts.

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