In the current market where deal activity is challenging and the initial public offering market is on hold, effective insurance risk management (IRM) at portfolio companies is one of the ways for private equity sponsors and management to drive value. Because of resource constraints, private equity sponsors concentrate on top priority initiatives, abandoning many other worthwhile savings programs, including IRM opportunities that could lead to potential cash savings in the millions. However, with an outside adviser these opportunities can be captured by private equity sponsors.
Often, sustainable cost savings can be achieved by making simple improvements to the risk management and safety practices at portfolio companies. By leveraging the purchasing power and aligning IRM strategies of portfolio companies, private equity sponsors can decrease insurance premiums and vendor costs while improving services and coverage terms. Typically, implementing a leveraged purchasing arrangement decreases premiums, vendor fees and loss costs by 5 to 20 percent.