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Questions and thoughts from underwriters for the banking industry regarding PPP and LIBOR

Underwriting Spotlight

Financial, Executive and Professional Risks (FINEX)
N/A

By Alison MacLaren | February 1, 2021

Key questions from underwriters regarding the PPP and LIBOR transition.

Common Paycheck Protection Program (PPP) questions from underwriters:

Explain the bank’s level of participation in the PPP.
Were the bank’s PPP loans restricted in any way to certain borrowers, e.g. only existing customers?
If the bank loaned to new customers, what was the breakdown in loans given to new vs. existing customers?
What is the breakdown of industries loaned to?
How much did the bank collect in fees? What amount, if any, is being paid out in fees to agents?
Was there an audit conducted of originated loans? If so, what were the results and how did the bank respond?
Discuss how the bank is approaching the forgiveness process.

Common LIBOR questions from underwriters:

Discuss the institution’s LIBOR transition planning framework and its progress thus far.
Is the institution on track to meet transition deadlines ahead of the 2021/2023 cessation dates?
Describe client communication protocols and feedback from clients regarding same.
For legacy loans, discuss process and procedure for amending fallback language. What is the target completion date?
Is the institution intending to utilize rates other than SOFR?
What mechanisms or strategies are in place, if any, to address potential delta between lending and swap agreements?
What proportion of new loans contain an amendment versus a hardwire approach?
Identify internal training procedures for staff.
How has COVID-19 disrupted and changed your LIBOR transition planning?
How has the revised June 2023 deadline impacted preparations and internal deadlines?

Disclaimer

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. COVID-19 is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

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Banking Industry Leader, Willis Towers Watson

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