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Why Trump can’t secure bond AND there is more
Posted on: March 20, 2024 at 14:56:27 CT
Ace UNC
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Any insurance company that underwrote a bond for Donald Trump in his civil fraud case in New York would undoubtedly be criticized by those who don’t like the ex-president. Chubb Insurance found that out when it underwrote a much smaller bond in E. Jean Carroll’s defamation suit against him. Chubb’s chief executive, Evan Greenberg, was forced to put out a letter saying, “We don’t take sides, it would be wrong for us to do so, and we are in no way supporting the defendant.”
But you don’t need to look to politics to understand why Trump’s lawyers said Monday that it was a “practical impossibility” to secure a bond allowing him to appeal the $454 million judgment against him. There’s a much simpler explanation: insurance regulation.
In an unregulated insurance market, Trump would have been able to come up with a surety bond with ease because his net worth far exceeds the size of the bond he needs. Some enterprising business would have asked him to put up some of his real estate holdings — say, $1 billion worth — as collateral. For good measure, it would have charged him a high premium on the bond.
But the state insurance departments that regulate surety bond companies don’t allow that kind of business. It would be highly risky for insurers to accept real estate as collateral because its value is unpredictable and it’s hard to sell on short notice. Regulators don’t allow insurance companies to charge high premiums for taking on that kind of risk; they want insurers to charge low premiums for low risk.
Typical premiums on surety bonds are just 0.5 percent to 3.0 percent, according to Neil Pedersen, the owner of Pedersen & Sons Surety Bond Agency, a New York-based broker.
Insurance regulators see such rates as high enough because they expect that the insurers will be fully protected from risk.
“You’re underwriting to an assumption of no loss,” said Julie Alleyne, the general counsel and vice president of policy at the Surety and Fidelity Association of America, a trade group. She had no comment on the Trump case.
Interest on the judgment is accumulating daily. For Trump to have gotten the bond he needs to appeal, he would have needed to post about $1 billion in cash and liquid securities, more than twice the size of the judgment.
MORE:
https://x.com/lawofruby/status/1770518970946183473
If NY Attorney General is able to start enforcing her judgment as soon as next week, don’t expect Trump Tower to top her list. Why? Because as recently as August ‘23, Trump reported Axos Bank still has an outstanding loan on that property for “over $50,000,000.”
Edited by Ace at 16:03:30 on 03/20/24
But you don’t need to look to politics to understand why Trump’s lawyers said Monday that it was a “practical impossibility” to secure a bond allowing him to appeal the $454 million judgment against him. There’s a much simpler explanation: insurance regulation.
In an unregulated insurance market, Trump would have been able to come up with a surety bond with ease because his net worth far exceeds the size of the bond he needs. Some enterprising business would have asked him to put up some of his real estate holdings — say, $1 billion worth — as collateral. For good measure, it would have charged him a high premium on the bond.
But the state insurance departments that regulate surety bond companies don’t allow that kind of business. It would be highly risky for insurers to accept real estate as collateral because its value is unpredictable and it’s hard to sell on short notice. Regulators don’t allow insurance companies to charge high premiums for taking on that kind of risk; they want insurers to charge low premiums for low risk.
Typical premiums on surety bonds are just 0.5 percent to 3.0 percent, according to Neil Pedersen, the owner of Pedersen & Sons Surety Bond Agency, a New York-based broker.
Insurance regulators see such rates as high enough because they expect that the insurers will be fully protected from risk.
“You’re underwriting to an assumption of no loss,” said Julie Alleyne, the general counsel and vice president of policy at the Surety and Fidelity Association of America, a trade group. She had no comment on the Trump case.
Interest on the judgment is accumulating daily. For Trump to have gotten the bond he needs to appeal, he would have needed to post about $1 billion in cash and liquid securities, more than twice the size of the judgment.
MORE:
https://x.com/lawofruby/status/1770518970946183473
If NY Attorney General is able to start enforcing her judgment as soon as next week, don’t expect Trump Tower to top her list. Why? Because as recently as August ‘23, Trump reported Axos Bank still has an outstanding loan on that property for “over $50,000,000.”
Edited by Ace at 16:03:30 on 03/20/24
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Why Trump can’t secure bond AND there is more - Ace AU - 3/20 14:56:27