Q. What is a "cut through" letter?

Financiers, particularly banks and financial institutions and their risk managers require proof that the completion guarantor has the financial resources behind it to satisfy its guaranty. Completion guarantors lacking superior financial resources will normally be asked to secure reinsurance, which is a form of insurance between insurers. It involves another, financially stronger insurance carrier (the reinsurer) agreeing to accept all or a portion of the risk covered by the guaranty issued by the completion guarantor. A "cut through" gives the financiers recourse against the reinsurer in the event the completion guarantor fails to fully cover any claim if the guaranty is called. Financiers do not require "cut through" letters from IFG due to Fireman’s Fund’s strong financial resources and ratings.