2023 Innovation Awards: Intellectual Property Portfolio Insurance

CAC Specialty
Intellectual Property Portfolio Insurance

Protecting intangible intellectual property against infringement can be costly and time consuming.

Some studies indicate that investments in intellectual property comprise about two-thirds of the world’s assets, said Andrew Mutter, Chattanooga, Tennessee-based senior vice president and co-leader of contingent and litigation risk for CAC Specialty.

But “accreting IP is a high-value proposition,” he said. “The problem can be that it takes a long time for there to be a return on their investment.”

The only “real way to do that” has been to sell some of the portfolio of intellectual property, which includes patents, in the open market, which “always results in making less money than you should,” said Shai Silverman, New Haven, Connecticut-based senior vice president, contingent risk, at CAC Specialty.

Mr. Mutter said CAC’s intellectual property portfolio insurance “creates certainty” around high-quality patents and provides returns on revenue “that allow you to get better lending than would otherwise be possible, to plow back into your company, keeping the lights on.”

Under CAC’s program, an insurance policy guarantees licensing fees over several years on the basis of a company’s portfolio of intellectual property. Policyholders can then borrow against the insurance policy at a lower cost because of the insurance backup, Mr. Silverman said. CAC’s in-house investment bank, Dorset Peak, secures the loan.

Coverage starts at $20 million and can increase to more than $100 million, Mr. Mutter said.

“It’s a very efficient and effective way to get IP owners a portion of value for their use, without having to give up a large amount of upside” and reduce their capital, Mr. Silverman said.

Most of the 10 leading insurers in the contingent risk market will be participating in the program, said Mr. Mutter, who did not identify them further.

The first program was placed early this year. In that case, CAC insured a specific portfolio of patents on behalf of a company that had spent several years developing the portfolio. This allowed CAC to secure a debt facility for the company from Dorset Peak.

CAC is working on several more programs, Mr. Mutter said, adding the market has been receptive.

“This is solving a problem in particular in the IP space that’s been persistent,” he said. “There’s been a real desire to find a way to do exactly what this solution does.”