Montreal: The Canadian completion bond industry has emerged from a major shakeup with one of three established suppliers, Motion Picture Bond Co., slated to wind down operations by midsummer. MPB has not signed any new business since the start of the new year.

The end of operations at MPB is directly tied to the sale of parent company and re-insurer London Guarantee by Great West to St. Paul Insurance in the U.S. St. Paul declined to serve as a re-insurer for MPB, says Sally Dundas, interim manager with MPB in Toronto.

MPB operated offices in Montreal, Toronto and Vancouver, employing on average 20 people. Dundas says about 67 MPB projects were not fully delivered at the start of 2002.

New bond business in Canada is now being split between The Completion Guarantors and Film Finances Canada (1998).

The entire insurance industry, including the entertainment sector, was hit hard with major rate increases following Sept. 11.

The cost of new completion bonds, as re-insurance rates increased, is now on average 40% higher, or more, than last year – from as low as 1.4% of a production’s budget to 2% and more. ‘We can’t move off that. Before there was a kind of slightly discretionary area, but now it’s mostly gone,’ says TCG chairman and CEO John T. Ross.

The increasing complexity of production financing, reflecting the multiplicity of lenders and buyers, has also significantly deepened the workload for completion guarantors, and other industry sources are advising producers to budget as much as 3% going forward.

In the new market conditions, FFC president Bob Presner says lenders have adopted a more conservative outlook and become more aware of the real value of completion bonds. FFC has offices in Toronto and Montreal.

TCG, which has offices in Montreal and Toronto and an agent in Vancouver, started signing new business in early April after suspending operations for more than a month, says Ross. TCG was obliged to find a new insurer when Connecticut Surety Group dropped out for financial reasons. TCG was then obliged to find a new insurer (Liberty International Underwriters) before its re-insurer, XL Re in the U.S., would accept any new business, says Ross

Lenders and financiers, like banks, Telefilm Canada, gap financiers and broadcasters, require producers to take out completion bonds as insurance the productions they invest in will be delivered (to distributors and end users) on time and on budget.

Most sincere thanks

On behalf of the many staffers who worked with MPB over the past 25 years, Dundas says, ‘All of us who work here really appreciate the support and friendships we have with our clients, both producers and beneficiaries, especially during these last few months of having to close down the company. It meant a lot to us and it’s always a difficult thing to go through.’

TCG signed 70 to 80 productions in the past year. Ross says about three of those productions required ‘advances.’ MPB bonded about 60 productions in the past year, none of which required advances, while FFC, which has hired additional staff in the past few months, and is re-insured by Lloyds of London, bonded between 40 and 50 productions in the past year.