Frequently Asked Questions

How can I get a letter of interest (LOI)?

Before financiers and investors will consider providing any funds for your production, you are often asked to submit a letter from the bond company to demonstrate its willingness to consider bonding your production. To receive our letter of interest, please complete the Picture Information and send it to us via email with a request for a letter of interest. Provided your film or television production meets our current prerequisites, we will usually send our letter of interest to you within one or two days following your request.

What is a completion bond?

A completion bond is an agreement under which the financiers and investors in your production are guaranteed that your production will be completed on schedule, on budget and delivered to principal distributors. Distributors will often condition the payment of all or a portion of their license fee upon the delivery of your production. To ensure that your production will be delivered to distributors, your financiers and investors will usually require you to obtain a completion bond as a condition of funding. Provided the strike price has been made available for you to produce your production, your financiers and investors will be reimbursed the production costs they have advanced if your production is not completed and delivered to the distributors in accordance with the terms of the completion bond. However, if your production is completed and delivered as promised, the completion bond does not provide any guaranty that the distributors will pay their license fees or that the proceeds from the distribution of your production will be sufficient to provide an adequate return on investment.

Why do I need a completion bond?

As a producer of a film or television production, you are often required to obtain a completion bond for the benefit of the financiers and investors in your production as a pre-condition to funding. Some financiers and investors will not require completion protection for a production that has a small budget. However, for any film or television production with a budget of $2 million or more, a completion bond is highly recommended and often mandatory. The completion bond will protect the financial interests of your financiers and investors in the event your production is not completed on time and on schedule, and delivered to the principal distributors in accordance with the terms of the completion bond. In that case, under the terms of the completion bond your financiers and investors will be reimbursed the production costs they have advanced provided the strike price has been made available for you to produce your production.

How can I get a completion bond?

Our Production and Business Affairs departments must carefully review and evaluate all significant factors to determine if your film or television production presents an acceptable risk. We do not have any formal application or submission process. How We Work describes the steps to getting a completion bond for your production. During this process, we may ask you to provide Picture Information, Production Information, Legal Information, Basic Insurance Coverages, and other information or documents for our review and approval.

Before we issue the completion bond, we must evaluate and accept the production risks associated with your film or television production. In making this evaluation, we will review your production elements and usually request meetings with your production team members to solicit their ideas and opinions on the budget and schedule and any unusual or challenging conditions.

After we accept the risks and underwrite your production, our in-house Business Affairs staff will promptly and expertly prepare the Completion Guaranty, the Completion Agreement and related documents for your or your legal counsel’s review and comment. Under the terms of the Completion Agreement, you will (1) undertake to produce, complete and deliver your production in accordance with the terms of the Completion Agreement; (2) permit us to monitor and take control of the management of the production if we believe your production will not be completed and delivered on budget or on schedule; and (3) grant to the completion guarantor a charge or security interest over your rights and interests in your production.

If there are any inconsistencies between your rights and undertakings and ours rights and undertakings, or those of your financiers, investors or distributors, then those parties will enter into an interparty agreement to resolve such differences. The inter-party agreement is customarily prepared by the lead financier’s legal counsel.

What documents and reports are needed?

After you provide us with the Picture Information, so long as your film or television production meets our then-current prerequisites, we will first ask you to submit Proof of Funds (POF). Proof of funds (POF) typically takes the form of a short summary describing each financier and investor that has committed to advance production funds, the amount of and, if applicable, any pre-conditions (e.g., script or cast approval, completing pre-sales) to any funding commitments, together with a fully-signed copy of a term-sheet, commitment letter or funding agreement. We do not require all production funds to be on deposit. We simply want proof that you have secured the funding commitments needed to fully cover the budgeted costs of production.

Once POF is accepted, our Production Department will request copies of the approved screenplay or teleplay(s), budget, cash flow schedule, shooting schedule, post-production calendar and locations (shooting and post-production) for your film or television production.

Next, you will need to furnish the Production Information to our Production Department and the Legal Information to our Business Affairs Department for our review and approval.

If we approve your submission for underwriting, our Business Affairs department will prepare and negotiate the Completion Guaranty, the Completion Agreement and related documents including the Director’s UndertakingCompletion Guarantor’s Power of AttorneyProducer’s Power of Attorney and Copyright Mortgage and Assignment. You will also need to furnish (or have your insurance broker-agent furnish) proof that you have obtained the Basic Insurance Coverages. The legal counsel representing each of your financiers and investors will typically prepare their Funding Agreements and collateral assignments. The legal counsel representing the principal financier or investor in your production will typically prepare related documents including the Interparty Agreements, Intercreditor Agreements, Notices of Assignment, Letters of Credit, Laboratory Control Agreements and Deposit Account Control Agreements. If a collection account will be opened, then the legal counsel for the collection agency usually prepares the Collection Account Management Agreement.

Throughout principal photography and post-production, you will need to regularly provide us with copies of daily call sheets, daily wrap reports, daily production reports, cost reports (weekly during principal photography and monthly during post-production), and notices of availability or delivery to distributors until your production has been completed and fully delivered.  Other reports or notices may be required upon request.

Do I need a broker?

You will need to engage an insurance broker or agent to assist you in obtaining the Basic Insurance Coverages for your production, which is a prerequisite to issuing the completion bond. We work closely together with many insurance broker-agents in that role. We greatly appreciate their assistance and the risk management advice and support they provide to our customers. If needed, we can recommend several experienced and reputable insurance broker-agents.

When it is required to qualify the completion bond for certain governmental rebates, credits or subsidies, we may use the services of a local broker-agent and/or local insurance carrier. Additional fees and charges may apply in such circumstances.

Except as indicated above, we do not use insurance brokers or agents to market and sell the completion bond to you. To achieve the most efficient, expedient and economical bonding procedures, we believe we must develop close working relationships with our customers and promote direct and forthright communication. This allows us to offer 24/7, worldwide support to you and your production team without delay. Adding intermediaries to the line of communication can often cause information dilution and other inefficiencies which would increase the cost for our product and service.

Do I need a lawyer?

Financiers and investors will typically engage internal or external legal counsel to represent their interests. Once we underwrite your production, you will need to enter into a Completion Agreement and related documents, which our in-house Business Affairs staff will prepare for your or your legal counsel’s review and comments. These agreements and documents will affect your legal rights and interests. We do not provide legal advice to our customers as we are neither licensed nor qualified to do so. We highly recommend you seek the advice of legal counsel in order to become fully apprised of the legal implications agreements and documents you will need to enter in connection with bonding your film or television production.

What is the Strike Price?

The strike price is an amount specified in the completion bond that represents the total costs that you and UniFi determine will be needed to produce, complete and deliver your production. The strike price includes (1) the budgeted above-the-line and below-the-line costs including union fringes and insurance costs, (2) an appropriate contingency allowance that you and UniFi agree upon, and (3) the fee or premium that is payable to UniFi. Under the terms of the Completion Guaranty, the Completion Guarantor has no liability if your financiers and investors fail to make the full amount of the strike price available for you to produce, complete and deliver your production in accordance with a pre-approved cash flow schedule.

What should I budget for the contingency?

The contingency is an amount of your financing designated to cover cost overruns from unlikely or unintended events. It is not meant to cover production costs that are known, anticipated or reasonably foreseeable. Historically, the standard contingency has been 10% of the other budgeted costs excluding the bond fee. However, we recognize that sometimes a different contingency allowance may be appropriate. Once our Production staff has had the opportunity to review your production elements and meet with your production team, we will be in a much better position to find the right level of contingency needed for your production. If the amount of the contingency allowance in the budget is less than what UniFi requires, we may permit producers or others to pledge a portion of their fees to make up the difference.

What should I budget for the bond fee?

Many of our customers choose to enter into an exclusive, long-term or multi-project arrangement with us. Although we still must evaluate and underwrite every production individually, we generally offer those customers our best rate (i.e., a percentage of each budget) that applies to all of their covered productions. Otherwise, our fee is determined on a project-by-project basis dependent on several factors including the budget size, shooting and post-production locations, experience and expertise of the production team, quantity and complexity of action and visual effects, and other associated production risks. In either case, we will do our best to provide unparalleled service and support at an extremely competitive rate. Our fee is usually paid to us on the first drawdown of your production financing.  Please contact us for your personalized quote.

Will UniFi escrow production funds?

We are often able to accommodate a customer’s request for us to hold in trust some or all of the funds being advanced by financiers and investors. Our Business Affairs staff has the expertise and experience to assist you, your financiers and investors in preparing the escrow-type arrangements. Unless instructed otherwise, the funds held in trust cannot be withdrawn and made available to cover any costs of production until the completion bond is fully executed. Once the completion bond is in effect, the funds held in trust may be disbursed in accordance with your financiers’ and investors’ instructions. Other than passing through any fees and expenses we may be charged, we usually provide this service free of charge but we keep any accrued interest to help defray our costs.

Do I need to protect against currency risk?

We highly recommend you do if your production costs will be spent in multiple currencies. Projected costs may be significantly impacted by the fluctuation of currency rates throughout the course of production. The completion bond does not provide protection against any losses that may result from variations in currency exchange. Currency risk can often be reduced through simple hedging, which limits the impact of foreign exchange movement.   If your financiers and investors do not offer foreign exchange hedging services, we can recommend risk and asset management advisors with expertise and experience in executing currency transactions and managing the foreign exchange exposure for film and television productions.

Does UniFi offer a single policy that bundles production insurance coverages and the completion bond?

No.

It is not the industry standard to offer these coverages together in one stand-alone policy. We believe any advantages a “bundled policy” may have are far outweighed by its disadvantages. The terms and conditions of the bundled policy and the manner in which the insurance and bond coverages interact, including how and for what purposes the contingency could be used, may be confusing and ambiguous, and leave coverage gaps. Furthermore, it is very likely that you will need to bind your production package and other insurance coverages well before the time you will be ready to get the completion bond. Insurance risks and completion bond risks differ.  We firmly believe each set of risks should be evaluated and underwritten at different times by different teams who have specialized expertise, knowledge and experience.

We are big proponents of giving consumers the right and freedom to choose to engage the insurance broker or agent, insurance company and bond company that is capable of giving them the best product, service and support at competitive prices. That choice may be compromised if customers are required to use the same insurance company to meet both its insurance and bonding requirements.  However, we welcome your insurance broker or agent getting a quote from OneBeacon Entertainment for your insurance needs.

 

What are the bond company’s rights and obligations?

The completion guarantor is responsible to pay your financiers and investors the sum of the funds they have advanced if your film or television production is not completed and delivered to distributors in accordance with the terms of the completion bond. We will have the right to monitor and oversee the progress of your production and to take necessary steps to ensure it stays on budget and schedule and is completed and delivered as promised.

During production and post-production, you will be responsible for timely furnishing us with call sheets, wrap reports, production reports and cost reports. If your production is having difficulty staying on budget or schedule, we will provide guidance and support to help put it back on track. In most cases, we will try to meet with you and the production team to have an open exchange of ideas leading to shared, practical solutions. In the rare instance, we feel that we need to supervise the production, we will always strive to act timely, sensibly and collaboratively.

If we advance completion sums (i.e., funds needed to cover cost overruns and any claims made under the completion bond) then we will have the right to recover such funds from the proceeds coming from the sales and distribution of your production. Our recoupment position usually comes before any proceeds are distributed to profit participants but only after your financiers and investors have fully recovered the production funds they advanced.

Are UniFi and ASIC licensed?

UniFi is a California licensed property/casualty broker-agent (License#: 0I48780).

Our completion bonds are currently being issued directly by Atlantic Specialty Insurance Company (ASIC). ASIC is an admitted carrier authorized to write surety coverages in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands and is one of OneBeacon’s highly-rated, financially strong insurers.

An admitted carrier is one that is licensed by a particular state to do business as an insurance company and which must conform to state laws and regulations including charging only rates that have been approved by the Department of Insurance. The fundamental reason for government licensing regulation of insurance is to protect consumers and ensure that promises made by insurers are kept. Licensing provides crucial safeguards for consumers both in terms of financial and policy regulation. An added benefit of working with an admitted carrier is that the state has the responsibility to pay an admitted insurer’s claims, up to state-specified limits, in the event of the insurance company’s insolvency.

Licensed insurers are subject to periodic financial examinations. Examiners investigate a licensed insurer’s accounting methods, procedures and financial statement presentation. These exams verify and validate what is presented in the insurer’s annual statement to ascertain whether the company is in good economic standing and has the financial ability to pay policyholders’ claims. Moreover, licensed insurers are subject to state laws and regulations establishing how and when policy claims must be investigated, adjusted.

Regulation also provides an outlet for consumers to seek redress if a licensed insurer makes promises it does not keep. States have established special consumer units to receive and handle any complaints and work with policyholder and insurance companies to resolve any disputes.

Not all bond companies are licensed insurers.  Unlicensed bond companies may not be subject to the same laws and regulations.   You, your financiers and investors may lose significant rights and protections under insurance laws and regulations by choosing to bond with a non-licensed bond company.

We provide extreme legal and financial protection to our customers by issuing our completion bonds directly by and in the name of ASIC, which is an admitted insurance company within the OneBeacon Insurance Group.

Do I need a cut-through endorsement letter?

No.

Financiers and investors need proof that a completion guarantor will have the financial resources to satisfy any potential liability under the completion bonds it issues. A bond company that is not a licensed insurance company or which lacks financial strength must secure reinsurance. Under a reinsurance policy, a financially strong, licensed reinsurance carrier (the reinsurer) agrees to accept all or a portion of the risk covered by the completion bonds issued by the completion guarantor. Few completion bonds are issued directly from the reinsurer and many are issued by companies that are not licensed insurers. A cut-through endorsement letter, also referred to as a loss payee endorsement or an assumption agreement, is the confirmation that any part of a loss covered by reinsurance will be paid directly to the policyholder by the reinsurer if the completion bond company fails or is unable to pay a loss. The cut-through endorsement is so named because it provides that the reinsurance claim payment “cuts-through” the usual route of payment from the completion bond company-to-policyholder and then reinsurer-to-completion bond company, substituting instead the payment route of reinsurer-to-policyholder.

There may be disadvantages if your completion bond is issued by an unlicensed bond company.  Firstly, financiers and investors are not placed in direct contractual privity with a financially strong insurance company. Speak with your legal counsel about the benefits of having a direct relationship with a financially strong insurer. Secondly, in such instances the completion bond company’s risk is usually backed by multiple reinsurers. Each reinsurer typically takes responsibility to pay only a certain proportion of any loss and usually there is no reinsurer that accepts the risk of nonpayment by any other reinsurer. Thirdly, a licensed insurer must comply with various state laws and regulations that govern its activities and are established to protect policyholders. An unlicensed completion bond company may not have to follow, and the terms and conditions of its completion bond may not be subject to, those laws and regulations. You, your financiers and investors may lose the rights and protections provided by those laws and regulations if you choose to bond with an unlicensed bond company.

Our completion bonds are issued directly by and in the name of Atlantic Specialty Insurance Company (ASIC).  ASIC is an admitted carrier with excellent financial resources and ratings within the OneBeacon Insurance Group. We place your financiers and investors in direct contractual privity with ASIC, who takes full responsibility for paying 100% of any completion bond losses. Accordingly, your financiers and investors need only verify ASIC’s excellent financial strength rating and do not need to scrutinize the financial strength ratings of numerous reinsurers.  You and your financiers and investors will not be forced to separately resolve and enforce any claim by multiple actions against multiple reinsurers in multiple places. Our structure, which differs from other completion bond companies, is designed to give you, your financiers and investors extreme legal and financial protection and security.

Your financiers and investors should not need a cut-through endorsement letter because our completion bonds are issued directly by ASIC an admitted carrier with excellent financial strength and ratings and who takes responsibility for paying 100% of any completion bond losses.

What if I have another question?

We want to hear from you. If you have any questions, please don’t hesitate to contact us