Note: APPETD has embarked on this process to assist its members who need this service. No one is compelled to join APPETD on this scheme. However, any private institution that needs to be registered with the DoE must provide its own surety or fidelity cover.

• What is the form of the Guarantee?

Gtee form means the wording of the doc and the communication to the student vs DoE and to Insurers. Thus we will give a confirmation of cover to the DoE for the applicable members, based on the key conditions, being premium payment, info provision and claims protocols. Members will get insurance policies, and students will get a "user guide" to explain how the refund works)

This would be a Pooled Guarantee Facility in favour of all students at APPETD member institutions (and non members) who paid fees in advance where there is a valid need for a refund.

Refund would only take place if claims or relocation protocol is unsuccessful eg:

• Claims protocol based on sustaining education process:
  
  
• Confirm student status on course fees paid, materials issued, interim progress certificate
• Identify appropriate alternative APPETD member, confirm transfer
  
  
• Offer transfer to student & refer any issues of concern to "Claims Committee" (Marsh & APPETD)
  
  
• Where bank / loan finance of course is confirmed, refund for courses that are not transferable will be to financier at value of course fee (or agreed value taking account of progress certificates and materials provided by the institution)
  
  
• Other student refunds being a last resort
  
  
• Claims data to be shared with APPETD and DoE quarterly, as part of a Management Committee for the facility
  
  

Therefore the structure in principle would be as follows: (note form of guarantee to be answered)

• Main Indemnity is to the student for all fees paid in advance in respect of the incomplete part of a course, and / or :
  
  
• If no half year pass certificate has been issued, the full annual tuition cost, and / or
• The fees paid in advance less the reasonable cost of text books and course materials issued to the student, assuming that the course can be continued at another APPETD member
  
  

• Protection to students for catastrophe loss / liquidation of APPETD member would include: (Note - these covers are conditional on additional premiums, we should take care to explain that cover will be restricted per each insurance policy)
  
  
• Cash resources exhausted from operational requirements, leading to a default to creditors (primary credit insurance to be obtained, similar to that supporting the guarantees)
  
  
• Cash deficit from fraud ( Fidelity cover to be quoted and arranged as an important risk mitigant)
  
  
• Cash deficit from unprofessional conduct and failure to deliver tuition leading to cessation of planned annual / monthly tuition receipts (PI cover for specific management and performance risks to be arranged)
  
  

• Has the proposed guarantee been accepted by the Dept of Education?
  
  

Yes

• What will the cost be on an annual basis?
  
  

The cost would be as follows:-

Premiums for the following that include either admin fees or commissions, fully disclosed

Guarantee Facility including a credit reinsurance component
Professional Indemnity
Fidelity cover

The premium costings will be based on the amount of the guarantee cover needed by each APPETD member, plus the risk protection costs above, and adjusted for the risk quality of each member.

Marsh admin and consulting fees will apply based on a declining percentage of premium, providing the benefit of efficiency and critical mass.

We would need the required information per the institution in order to perform a risk analysis and allocate a specific premium per the institution (or APPETD Member College).

All administration costs would be communicated to you via APPETD once they have been agreed with APPETD.

The following is an example of the cost vs. benefit of this Guarantee facility compared to the Bank Guarantee:

• When will cover be effective?

Cover is required from 1 September 2007 by the DoE. In order to incept the cover, the APPETD members which do not already have guarantees in place must have paid the rated premium to the Marsh facility, and signed the club rules.

The cover needed on 1 September is not the same as on 1 January each year, because of the timing of payment of annual fees. The cover will be adjusted each year based on the declared student and course information, per member, as required by Marsh.

Marsh also needs to define the amount of the potential refund per course, based on agreed rules where half year certificates of completion / progress will be accepted by other APPETD members, and a reasonable allocation of fees to course materials that will be accepted by the other APPETD member.

Note that the default amount of cover for each student is the annual paid in advance fees amount, where the institution collapses or discontinues the course.

• What is the relevance of some required information to risk?

The Required Information document serves to gather information to do both the risk analysis for the determination of the premium to be paid by a specific member and also to keep a data base in order to have options to be utilised as we want the claim against the facility to be the last resort. For instance we would want to know the names of the courses per each member for ease of transfer of students, also we would want to know the number of lecturers as the underlying principle is for the students to continue with their education and if there is one lecture for one course or subject then what happens when that lecturer is no more there for whatever reasons, is there continuity. The information would be kept strictly confidential by Marsh and used for the said purposes only.

• What happens if the institution is less than 3 years old?

Please provide as much information as available if the institution does not have a 3 or 5 year information.

• Is it possible to give me a little bit of background to the DOE's request for facility insurance?

It is now mandatory or regulatory if you offer a Full qualification (120 credits) to register with the DoE, one of the requirements is a surety fund, for fees paid annually in advance.

• Has the APPETD appointed Marsh to do a costing analysis to develop an insurance "package" for members of APPETD?

Yes APPETD has appointed Marsh to develop an insurance "package" that will assist all the private providers including APPETD members. According to the DoE the onus is on the institution to supply this surety. APPETD deemed it wise to establish a group scheme for its members.

Many members are not obliged to join the group scheme if they have other means of providing a guarantee for the annual fees to the DoE.

• Is all the information requested absolutely necessary for the analysis? I am sure you understand that a lot of the information requested is highly confidential?

It will assist Marsh to make a good assessment of your business viability and sustainability for risk analysis purposes to be able to determine the premium allocation to each institution.

One of the reasons to appoint Marsh was to maintain independence and confidentiality for members.

• There is frequent reference in the FAQ's to 'paid in advance'. Most of our learners pay monthly in arrears - is it the intention not to cover them (this is not as strange a question as it may seem, the DoE requirements are not clear). We have about 190 learners, but less than 10 pay annually in advance.

Remember the Guarantee Facility is to cover the student who has paid his/her fees in advance (whether via a loan that the student would have to repay monthly or cash) to obtain education from you and then if there is a default on your part in terms of delivering the education. Then the student has to be refunded his/her money based on the claims protocol in order to continue with his/her education.

• Is it the intention to cover all students in all courses or only those studying National Qualifications (NQF aligned and SAQA registered)? National courses would likely be easier to transfer to another institution. We have many learners studying in-house courses which we have developed ourselves, and these would most likely NOT be possible to transfer to another institution.

The intention is to cover all students doing (120 credits) qualification courses whether offered by other colleges or not, where fees are paid annually in advance. At the moment the DoE is focusing on at least one National Qualification to officially register institutions as Private FET colleges. The onus rests with your institution/auditor to determine the turnover derived from these qualifications.

• We have no need of extra covers such as Fidelity Guarantee, Professional Indemnity or Credit Guarantee, only the requirements of the DoE must be covered. Is the cost of the Guarantee Facility separable from the rest and if so, what would its cost be in your example/comparison table attached to your FAQ's.

Yes it is separable and on the example about 80% of that cost is the Guarantee Facility cost. Note that the possible claims to the Guarantee Facility will generally come from PI and Fidelity exposures, and the intention is to use this cover as a protection to the Facility.

Marsh will have an incentive to minimise the insurance costs because we would like the Facility to be as wide ranging as possible, also to make the Facility sustainable and maximise the ability to pay claims.

• If students are enrolled on short courses, these are then clearly excluded from the Facility?

Yes for now.

• Is the premium envisaged annual or monthly - is there an option for providers?

That is still to be decided upon.

• Based on the example given, is the cost of the Guarantee Fund 7% of the value to be insured?

No, that was an example and we need the information we have requested in order to come up with more accurate figures. The intention of the example is to show the benefit of using the guarantee facility vs. the Bank Surety. The cost will range from 3 to 7% of the surety limit depending on the track record and amount of cover needed per member, and we expect that this cost will reduce to about 3 to 5% after 3 years, assuming that there have been no substantial losses to the facility. Note that this cost compares very favourably with standard guarantee structures which usually require 100% collateral AND 100% suretyships for recovery of the guarantee. In the case where collateral is provided by the institution the cost will be 1.5% of the value to be insured.

• If not, what is the approximate cost?

See the answer above.

• Will the institution that the learner is transferred to be paid for the tuition that they have to offer?

Yes, we plan to have a standard claim value per course, which will be transferred with the student. All rules of protocol would be agreed and signed for by APPETD members once they have been tabled and discussed.

• Does the institution have the right to refuse to take the student?

Yes, but this must be done annually in advance. We understand that there is limited capacity per institution, per course. If no transfers are accepted at all, this will increase the premium allocation to that APPETD member. All rules of protocol would be agreed and signed for by APPETD members once they have been tabled and discussed.

• Who has access to the information supplied by each training provider?

Marsh would have access to the information supplied.

• What information and stats will be published each year?

That would be decided by the members of the Guarantee Facility and APPETD. The main reports will explain the performance of the facility in total - gross premiums received, reinsurance premiums paid, claims paid, admin costs, investment income and the scheme result. The APPETD executive would have details of the individual claims, because a transfer or refund decision will be made by a joint APPETD / Marsh committee.