What is a DIP

1
(No Transcript)
2
What is a DIP?
A Default Insurance Program is an insurance
policy designed to indemnify Airlines against
loss from the financial default of a ticketing or
cargo agent covered under the program up to
agreed limits. It is run in conjunction with a
BSP or CASS program, and covers all agents which
have applied and been accepted into the program
by the Insurer. It is a method of airline
financial protection which the agent can provide
to the airline as an alternative to providing a
bank guarantee or other form of security (such as
paying cash).
3
What is a DIP? (cont.)
The IATA DIP program is underwritten and managed
by Contractors Bonding Ltd (CBL) as Underwriter /
Manager, and Gramercy Insurance Company as
originating Insurer. CBL/Gramercy also write
this coverage to protect IATA member airlines in
New Zealand Australia BSP, Philippines (BSP
CASS), Indonesia (CASS), Malaysia (BSP),
Singapore (CASS), United Kingdom and Europe.
4
Who is CBL?
Contractors Bonding Limited (CBL), is New
Zealands oldest established specialist Bonding
and Surety Insurance Company (established 33
years). CBL has built up a very sound and fine
reputation over this time and for some years, the
later Prime Minister of New Zealand, Sir John
Marshall, was Chairman of the Board. CBL writes
credit default and other specialist niche
insurance risks in over 12 countries - in
Australasia, SE Asia and UK / Europe - with
international business now accounting for over
80 of CBLs gross revenues. In 2005, CBL was
awarded 25th place in the 2005 Deloittes Fast
50 Index of New Zealand companies independently
ranked by growth. CBL are based in Auckland, New
Zealand and have a representative office in Kuala
Lumpur London to support these programs in SE
Asia Europe.
5
Who is Gramercy?
Gramercy Insurance Company is a specialist
insurer based in Atlanta, Georgia USA, founded in
1979, and now active in 16 states in
USA. Gramercy has an AM Best financial security
rating of B (positive). Gramercys gross
written premium for 2005 was US35m. CBL and
Gramercy write credit default and other niche
insurance programs in several countries sharing
risk and opportunities for acquisition.
6
What are the key features of the DIP?

• Automatic acceptance for all IATA Agents in good
  standing up to agreed limits (Auto Acceptance
  Limit).
• Premium based upon turnover through the CASS
  billing cycle premium 0.225
• Premium paid on a pay as you go basis, rather
  than an annual fee, such as with a bank guarantee
  or a bond.
• Coverage is for 100 cover for up to three CASS
  billing periods, subject to the terms of the
  policy.
• The program is structured by CBL, insured with
  Gramercy, which in turn shares risk with CBL on
  an agreed basis. Contract is for 2 years term
  (renewable on on-going basis).

7
Benefits to Agents

• Collateral security not required unlike bank
  guarantees, working capital is freed up.
• Applications submitted through IATA.
• Automatic acceptance for all IATA Agents in good
  standing up to agreed limits.
• Premium is billed on a pay as go basis through
  the CASS.
• Avoids multiple bonds being posted by agent for
  many different airlines. More efficient use of
  capital, less administration and lower costs.
• Larger agents which have turn over exceeding
  standards limits can apply for special
  acceptances, and will be considered on a case by
  case basis.

8
Benefits to Airlines

• Covers all registered accepted Agents carrying
  on business worldwide.
• Covers 100 of default, - as opposed to a bank
  guarantee which is for a set limit, which may or
  may not be enough to cover the default.
• Limits set in conjunction with IATA Airlines.
• No risk of insufficient cover, which is expressed
  as being equal to 3 billing cycles, - not a fixed
  amount like a bank guarantee.
• Claims paid within 10 working days of claims
  submission. Once claim is paid, CBL will
  institute recovery proceedings against the agent
  under subrogation.

9
Benefits to Airlines (Cont.)

• Program automatically allows for growth as the
  coverage and premium is based on turnover not a
  fixed sum.
• Avoids multiple bonds or bank guarantees being
  posted by agent for many different airlines.
  More efficient use of capital, and less
  administration.
• Avoids difficulties of encashment and potential
  for unforseen expiry dates.

10
What is the process?

• Agent completes a registration form, available
  through IATA and downloaded from website.
• Forward to IATA
• CBL will confirm cover and acceptance into
  program to IATA.
• IATA deducts premium from CASS and pays premium
  to, as agreed to, Gramercy / CBL.
• In the event of a default/claim, IATA will advise
  CBL, who will check that the claim is covered,
  and will arrange for immediate payment of the
  claim to IATA.
• To process applications for larger limits
  requiring special agreement, CBL will generally
  require further background information and
  financial accounts.

11
To summarize

• Full Protection for the airlines.
• Frees up working capital
• Lower costs and no collateral security for
  agents.
• Lower administration costs.
• Prompt payment of claims.
• Premium paid based on revenues, and paid with
  each CASS billing cycle.
• Allows for growth
• Releases all existing Bank Guarantees

12
CONTRACTORS BONDING LIMITED Tower One,
Shortland Street, 51 Shortland Street, PO Box
3772, Auckland, New Zealand Telephone 64 9 303
4770 Fax [phone] Email
mmiller_at_contractorsbonding.com URL
www.contractorsbonding.com