RFQ 83310120Q0016 Amendment 1 Question and Answer.pdf

RFQ 83310120Q0016 - AMENDMENT 0001

No Cost to the Government, Reinsurance Services Contract

Question and Answer

3 April 2020

1. Given the directive released late on March 18 by the White House for all federal agencies to adjust their operations to focus on “mission-critical” in an effort to limit the spread of COVID-19, are there any plans to adjust the response date deadline to give EXIM time to provide to questions and answers to offerors?”

Government Answer: EXIM has decided to extend this RFQ.

2. Will EXIM adjust the timeline of this RFQ given current market conditions?

Government Answer: Yes, EXIM has decided to extend its RFQ timeline.

3. A. The FAR 52.217-9 states that the length of the contract including options to extend may not exceed 5 years and 6 months. What is the duration of the support programs that EXIM wishes to institute? Are these to be annual programs, renewable or to be extended each year? Or, and perhaps pertaining more to the long and medium term obligations, is EXIM looking to support individual obligations for the anticipated duration (as best able) of these obligations, i.e. if there are x numbers of years remaining per a guarantee or insurance that the support would be for x number of years as well?

B. If awarded, how long a contract period would the broker have? Would the broker be entitled to receive ceding or other commissions from insurers and reinsurers for the duration of the policies issued by insurers and reinsurers, even if those commissions are received after the contract period with EXIM has ended?

Government Answer:

A. As stated in the RFQ, the resulting no-cost Contract is not subject to the FAR. Certain provisions of the FAR have been adopted as helpful for contract administration purposes. The no-cost Contract to be awarded by EXIM shall continue for a maximum period of 5 years. The Applicant’s risk-sharing structure support programs could extend beyond the no-cost contract.

B. EXIM’s past practice has been to pay the full amount of the reinsurance premium up front. The relationship between the Broker and the re-insurer however, is up to those parties to determine. Payment of premium/commission to the Broker will be only from the re-insurer. Such payments may continue for a period longer than the duration of the no-cost contract if the relationship between the Broker and the re-insurer so provides.

4. Which volume should we include the reps and certs and; any amendments issued or that will be issued, the RFQ posting in? (Assuming this will not count against page count limitations.)

Government Answer: All reps and certs are to be completed by registering through the System for Award Management (SAM.gov).

5. Attachment II references that as this is a no-cost contract, the FAR does not apply to the contract as a matter of law. However, the CO has determined certain FAR clauses should be made a part of the Contract as a matter of contract administration. FAR 52-209.10 Prohibition on Contracting with Inverted Domestic Corporations (Nov 2015) is included.

Government Answer: This can be removed

6. Will EXIM be limiting the award to US headquartered brokers and/or brokers who have not moved their headquarters out of the United States? What evidence in these regards will EXIM wish to see when proposals are submitted?

Government Answer: No. However, please remember Broker personnel requiring access to EXIM facilities, data or systems may have to pass certain security screening requirements.

Foreign personnel may have difficulty passing these criteria.

7. If this is a no-cost contract, may clauses 52.219-8, 52.219-9 and 52.219-14 be removed?

Government Answer: These can be removed

8. Under section (e)(1) may Offerors modify items listed if they do not apply? For example, may an offeror remove (v) 52.219-8, Utilization of Small Business Concerns, (vi) 52.222-41, Service Contract Labor Standards?

Government Answer: These can be removed:

9. Please confirm if compliance with Homeland Security Presidential Directive (HSPD) 12 applies to contractor employees who will require access to ExIM facilities only.

Government Answer:

Portions Homeland Security Presidential Directive (HSPD) 12 apply to performance of services by a Vendor within EXIM or Government facilities, while other portions addressing access to Government information/data/systems apply to the Vendor’s effort under the resulting contract regardless as to location of performance of work under the resulting contract. The Vendor is responsible for compliance with the Directive, as applicable.

10. Within the Special Requirements there is a Hold Harmless and Indemnification Agreement.

Is this provision non-negotiable and does the reference to “property” refer only to real property?

Government Answer: This is non-negotiable. Property refers to all Government Property – real, personal, intellectual. Note: this provision applies when the loss/damage to Government

Property resulting in whole or in part from the negligent act(s) or omissions or willful misconduct of the Contractor.

11. One of the Attachments has a filename referencing Attachment IV even though the document is Attachment V.

Government Answer: RFQ Attachment IV – Evaluation – Basis of Award is corrected to reflect

Attachment IV throughout document.

12. Attachment V: 5. Technical Submittal Instructions: Management Approach. Please confirm that resumes vs. biographical profiles should be provided of Key personnel proposed to perform the tasks outlined in the PWS.

Government Answer: Either, it is up to the discretion of the Applicant.

13. Does EXIM want contractors to create a reinsurance structure that covers all lines, or just aircraft?

Government Answer: EXIM does not have a specific structure in mind; it could be one line or multiple, industry, or a combination. We are asking the Applicant to propose a structure(s).

14. A similar reinsurance RFQ was issued in 2016; followed by the launch of EXIM’s re-insurance program in 2018 that worked with the private sector to provide an additional $1 billion in loss coverage for a significant portion of EXIM’s existing portfolio of large commercial aircraft financing transactions. Is this transaction a follow on transaction for the aviation portfolio or is there another portfolio or portfolios that EXIM is considering?

Government Answer: The pilot program has successfully ended, and this is not a follow on.

EXIM does not have a specific structure in mind; it could be one line or multiple, industry, or a combination. EXIM is asking the Applicant to propose a structure(s).

15. Does the “No-Cost to Government “compensation structure relate solely to fees?

Government Answer: Pursuant to the resulting No-Cost contract between EXIM and the Broker, EXIM shall not be liable to pay the Broker any compensation. The Broker must look to the re-insurer or other risk-sharing entity for payment of commission or other compensation for the Broker’s services in helping arrange the re-insurance or other risk-sharing contract between EXIM and the re-insurer or other risk-sharing entity. This structure relates solely to work product of the Applicant. EXIM expects to pay fees associated to any risk sharing.

16. In the re-insurance market, it is customary that the insurer bears the fees however in the capital markets, the entity purchasing protection bears the fees. Is there any consideration in changing the no fee to government model?

Government Answer: No. see answer to Question 15.

17. How should claims be treated when there is no disbursed amount? How should claims be treated when there is no authorized amount?

Government Answer: The LGAkey is a unique number that identifies an accounting record per transaction. A transaction may have multiple records depending on nature of the transaction.

For long and medium term, to aggregate the amount of the whole transaction, the transaction number is an eight digit alphanumeric number that can be identified in positions 3 through 8 of the lgakey, e.g., 08087603XX0001, 087603XX is the credit number, and the total disbursed amount for the transaction is $775,210.31. For all analyses one can aggregate the amounts by deal number. For example, if one deal number has three LGAkeys and only one of them has a claim paid, the entire deal defaulted not 1/3 of the deal. For short term multibuyer insurance, the multiple records to one credit number typically represent a renewal of the insurance policy.

18. We understand that EXIM follow OECD consensus guidelines but we would welcome your interpretations of these guidelines with respect to items such as pricing, content etc.

Government Answer: Financing terms and conditions, as well as, market-reflective premium are charged for each transaction in accordance with the OECD:

https://www.oecd.org/trade/topics/export-credits/arrangement-and-sector-understandings/financing-terms-and-conditions/

19. The reinsurance market reviews cedant loss ratio as a quick method to evaluate premium adequacy. Please can EXIM provide premiums for each category outlined in the “Default Rate Report” for each class of business, each tenor of business, and areas of focus in this report. Please provide paid and incurred loss ratio, gross and net of recoveries both against sovereign risks and private credit risk?

Government Answer: Premiums change over time and historical OECD rates can be found at https://www.oecd.org/trade/topics/export-credits/arrangement-and-sector-understandings/financing-terms-and-conditions/ The risk class (i.e., sovereign vs. private is found in Column D [Risk] in the dataset. EXIM pays out all expenses which would not be subject to the risk sharing product.

20. Does EXIM expect to change your exposure fee methodology or rates?

Government Answer: No.

21. We are aware of EXIM’s objectives (i.e. grow small business, increase medium/long term to 20% of portfolio, achieve #1 or #2 rank of ECA, crowd in capital etc), we would welcome your thoughts on the strategy to achieve these and associated time lines. What are EXIMs anticipated impact to the entire portfolio as this new business is on-boarded?

Government Answer: EXIM is working to provide more resources to support our exporters.

EXIM is not anticipating any significant changes. Each transaction undergoes significant reviews and vetting to ensure reasonable assurance of repayment. Additionally, EXIM’s Competitiveness Reports to Congress can be found on EXIM’s site:

https://www.exim.gov/news/reports/competitiveness-reports https://www.oecd.org/trade/topics/export-credits/arrangement-and-sector-understandings/financing-terms-and-conditions/ https://www.oecd.org/trade/topics/export-credits/arrangement-and-sector-understandings/financing-terms-and-conditions/ https://www.oecd.org/trade/topics/export-credits/arrangement-and-sector-understandings/financing-terms-and-conditions/ https://www.oecd.org/trade/topics/export-credits/arrangement-and-sector-understandings/financing-terms-and-conditions/ https://www.exim.gov/news/reports/competitiveness-reports

22. Is EXIM expecting to change any exposure limitations with respect to: deal, borrower and country size? Similarly, what are EXIM’s views on the largest perceived risk a deal, borrower and country level that EXIM is willing to assume? Is EXIM planning to modify how it earns its commitment fee for larger deals; please distinguish between project finance, loan guarantee, direct loans and insurance?

Government Answer: EXIM does not have any exposure limits to any subset of the portfolio, and EXIM does not expect to change any exposure limitations. EXIM’s Country Limitation Schedule (CLS) https://www.exim.gov/tools-for-exporters/country-limitation-schedule provides information as to where EXIM is open/closed. Each transaction must have a reasonable assurance of repayment. EXIM is currently reviewing its commitment fee requirements for larger deals. There is no further information at this time. The “Program” column distinguishes what the transaction is.

23. Please describe current large deals under consideration by EXIM.

Government Answer: EXIM has approximately $31 billion of transactions considered large deals under consideration at various stages of review. This $31 billion can be broken out into $25 billion in power transactions, $5 billion in commodities (oil & gas, petrochemical, etc. but not including agriculture), and $800 million in technology.

24. Please provide a listing of top ten largest losses by deal size, by country and by borrower preferably including information on the underlying transaction/policy if possible and the claim gross and net of recoveries.

Government Answer: This information, with the exception of the borrower, is provided in the dataset.

25. Are you able to engage a captive and/or a Special Purpose Vehicle to convert any transactions into a form that is easier for insurance and/or reinsurance markets to accept? For examples, direct loans.

Government Answer: Yes.

26. What affect will the current corona virus crisis likely have on the existing portfolio and EXIM’s 2% default rate limit?

Government Answer: Unclear at this time.

27. What affect will the current corona virus crisis likely have on deal opportunity going forward? Do you anticipate further reauthorization changes because of the current corona virus crisis?

Government Answer: Unclear at this time.

28. What types of transactions does EXIM contemplating to (re)insure into the private market?

Is it the full range of products, i.e. buyer and supplier credits insurance and guarantees, direct loans, bonds, or limited to one or more products? Are all aspects of your portfolio up https://www.exim.gov/tools-for-exporters/country-limitation-schedule for consideration for a reinsurance solution? For clarity we mean; historical portfolio, forward book, aviation and other large well performing segments, deal term etc.

Government Answer: Yes, all aspects of the portfolio are up for consideration.

29. What criteria would EXIM use for deciding which transactions to reinsure?

Government Answer: EXIM does not have specific transactions or criteria of transactions in mind. Criteria would be based on the Applicant’s proposal. Once an Applicant is chosen, proposals may be refined.

30. Please confirm that this RFQ considers various forms of reinsurance and hedging strategies to be considered: whether treaty on a quota share or excess of loss basis, facultative or insurance linked securities basis.

Government Answer: Yes.

31. Is EXIM able to issue guarantees on your own direct loan transactions to convert them into reinsurable exposures or are you able to support other mechanisms that achieve this, such as SPV’s, captives, fronting insurers?

Government Answer: Yes.

32. Beyond the aircraft financing portfolio, can EXIM give examples of transactions it would have reinsured over the last five years and the reasons why?

Government Answer: In the prior five years, due to the lack of a board quorum, EXIM was unable to approve transactions greater than $10 million. We are unable to say which transactions EXIM would have approved had it been fully functional. We are looking to risk-share the existing portfolio and/or new deals and looking to build upon our risk sharing experience.

33. Does the new reauthorization impose any limits or constraints to EXIM that EXIM would like to have reinsurance help manage? No. Is EXIM interested in using reinsurance in order to offer additional capacity? Yes.

Government Answer: See answers within question.

34. It is understandable that EXIM limited the amount of information you were willing to release as part of this RFQ. We will attempt to do our best to work with this limited information and are fully prepared to redo the analysis after selected as your reinsurance broker. These questions help to make assumptions as we model your portfolio with the data provided.

Government Answer: Thank you.

Long and Medium Term

35. Is this a full list of all transactions from the 1993 Fiscal Year to date, including those that have run-off?

Government Answer: Yes.

36. The LGA Key appears to include a unique number per ‘project’, with a second indicator for different related transactions. These cannot be assumed to be the same insureds/obligors, as in some instances the Risk letters are different. Is this understanding correct?

Government Answer: The LGAkey is a unique number that identifies an accounting record per transaction. A transaction may have multiple records depending on nature of the transaction. For long and medium term, to aggregate the amount (authorized, disbursed, claims, etc.) of the whole transaction, the transaction number is an eight digit alphanumeric number that can be identified in positions 3 through 8 of the lgakey, e.g., 08069040XX0001, 069040XX is the credit number, and the total disbursed amount for the transaction is $11,704,758.61. For short term multibuyer insurance, the multiple records to one credit number typically represent a renewal of the insurance policy.

37. How is Medium and Long Term defined, as there appear to be some classified as Long Term with shorter periods than Medium Term? Does the classification have any material internal impact?

Government Answer: In general, medium-term is <$10 million and a repayment term of 7 years or less. Long-term is ≥ $10 million and repayment term is greater than 7 years.

38. Do we understand your actual unextinguished exposure is the combination of The “Outstanding Exposure Amount” and the “Undisbursed Exposure”, so approximately $44bn?

Government Answer: Yes

Short Term

38. Is this a full list of all transactions from the 1994 Fiscal Year to date, including those that have run-off?

Government Answer: Yes.

39. Each line appears to be a transaction/policy rather than an underlying debtor. So where the BCL is shown as “Multi Buyer Insurance” we understand that to be an aggregation of exposure under one master policy. This is also supported by the Disbursements/Shipments being higher than the Authorised Amount on many lines. Is this correct?

40. There are multiple instances of long periods between the authorised and maturity dates.

Are these correct, and if so how does this arise when they are ‘short term’?

Government Answer: For all short term, please assume a 1-year period between authorized and maturity.

Both Portfolios Can premium/income/fee figures be provided ideally split between:

41. Long and Medium Term, and Short Term

Government Answer: Fees are on a per transaction basis and the rates change over time.

Current EXIM fees can be found https://www.exim.gov/tools-for-exporters/exposure-fees

42. Product: insurance, guarantee, direct loan Government Answer: Fees are on a per transaction basis and the rates change over time.

Current EXIM fees can be found https://www.exim.gov/tools-for-exporters/exposure-fees

43. Year: accounting year and/or authorized fiscal year Government Answer: Fees are on a per transaction basis and the rates change over time.

Current EXIM fees can be found https://www.exim.gov/tools-for-exporters/exposure-fees Are you able to provide triangulated statistics based on, for example, contracts authorised in a fiscal year ideally split between MLT and ST?

Government Answer: The data that has been provided and can be summarized by those statistics.

45. Are any of the guarantees or insurance contracts that the broker would be asked to find support for on EXIM’s behalf presently part of the existing (i.e. the “pilot program”) private market reinsurance placement?

Government Answer: The pilot program has successfully ended, and this is not a follow on.

EXIM does not have a specific structure in mind; it could be one line or multiple, industry, or a combination. EXIM is asking the Applicant to propose a structure(s), which could include transactions that were part of the original pilot program

46. Is the “pilot program” being extended?

Government Answer: The pilot program has successfully ended, and this is not a follow on.

EXIM does not have a specific structure in mind; it could be one line or multiple, industry, or a combination. EXIM is asking the Applicant to propose a structure(s).

47. Is the present offering an extension of the pilot program?

Government Answer: The pilot program has successfully ended, and this is not a follow on.

EXIM does not have a specific structure in mind; it could be one line or multiple, industry, or a combination. EXIM is asking the Applicant to propose a structure(s).

48. In providing data sets for 1) long and medium term and 2) short term obligations, is EXIM interested in having separate support programs, i.e. co-insurance, re-insurance, capital markets, etc., for each of these two classes of obligations? Or, could these two classes be combined, pending private market and/or capital market interest, into a single program?

Government Answer: This is at the discretion of Applicant; EXIM does not have a specific structure in mind; it could be one line or multiple, industry, or a combination. EXIM is asking the Applicant to propose a structure(s).

https://www.exim.gov/tools-for-exporters/exposure-fees https://www.exim.gov/tools-for-exporters/exposure-fees https://www.exim.gov/tools-for-exporters/exposure-fees

49. What is the level of support that EXIM seeks for the new program(s), is it similar to the current program level of $1 billion (or more, or less)? Is it a function of how much private market and/or capital market interest, or is it capped (see prior question) at a certain level?

Government Answer: There is no cap. This is at the discretion of Applicant; EXIM does not have a specific structure in mind; it could be one line or multiple, industry, or a combination. EXIM is asking the Applicant to propose a structure(s).

50. Is there a minimum threshold (we would suggest at least “A+” as rated by S&P or similar rating agencies) rating that would be accepted for the private markets and/or capital markets that would be supporting EXIM? If so, does that rating need to be maintained throughout the period of support or is it only necessary to have that rating at inception of the support program? If the former, in order to replace an insurer this potentially could mean incurring expenses (legal, broker, etc.) will EXIM consider reimbursing the broker for such expenses? Such expenses would be out of the ordinary, and can’t be anticipated at this time, yet 7.5 of the RFQ clearly indicates that the broker will provide services at no cost to EXIM thus we are wondering how and “who” would bear such exigent costs? Can EXIM please clarify?

Government Answer: EXIM does not have a threshold in mind; the applicant should propose one.

51. How is the 2% default rate threshold established in the “Nature of Work”? note that the blended default rate stands at about 7.3% across the long/medium term portfolio).

Government Answer: An explanation of the 2% default rate and how it is calculated can be found in the Bank’s Default Rate Report: https://www.exim.gov/who-we-serve/congressional-and-government-stakeholders/facts-about-exim/default-rate-reports

52. Of the existing portfolio Outstanding Exposure Amount, 35% is speculative grade Government Answer: True.

53. Many reinsurance markets have restrictions on Oil & Gas and Mining sectors. These 2 industry segments make up 17% of their current authorized amount in the portfolio. Will there be an opportunity to disaggregate the portfolio to accommodate those restrictions and place those risks on a facultative basis if needed?

https://www.exim.gov/who-we-serve/congressional-and-government-stakeholders/facts-about-exim/default-rate-reports https://www.exim.gov/who-we-serve/congressional-and-government-stakeholders/facts-about-exim/default-rate-reports