Trade Credit Insurance mitigates losses due to customer default on obligations caused by commercial and/or political events:
Commercial Default - including Slow Pay, Bankruptcy and Insolvency
Embargo/License Revocation and Related Governmental Actions
Outbreak of War, Rebellion and Like Disturbances
Currency Inconvertibility/Exchange Transfer
Expropriation of the Buyer
Interruption/Diversion of Voyage
Policy Type:
Single-Buyer Policy:
This Policy insures only one customer and covers sales made (or services rendered) up to a one year period. Short Term Single-Buyer Policy normally allows repayment terms of 180 days or less. Capital equipment and projects may be considered for coverage terms in excess of one year under a Medium Term Single Buyer Policy.
Multi-Buyer Policy:
This policy is normally intended to insure your portfolio of sales made (or services rendered) on unsecured open account terms. Some insurers may consider less than the entire portfolio, i.e. top accounts, or a select spread of risk. Insurers will not insure only your “risky” customers. The policy normally allows repayment terms of up to 180 open account. Longer terms for capital equipment are selectively considered by a few insurers.
Policy Coverage Selection:
Domestic Credit Insurance:
Insures sales to customers located in the same country as the insured entity. U.S. companies selecting domestic credit insurance may opt to also include their Canadian customers.
Foreign Credit Insurance:
Insures sales to customers located in countries other than that of the insured entity. Domestic and Foreign Insurance: Insures sales to all the countries you sell to.
Political Risk Insurance
Political Risk Insurance mitigates loss arising from actions created by the foreign government where you are transaction business. Some policy options insure select risks, while others provide a broader scope of coverage:
Investment Based click for description - double click to close
Contract Frustration Based click for description - double click to close
Confiscation, Expropriation, Nationalization (“CEN”)
Protects an Insured's foreign investment against confiscation by a foreign government. The policy covers an investor's net investment, i.e.: equity contribution plus retained earnings, direct loans to the foreign entity or loans that are guaranteed by the Insured, net accounts receivable and inventory carried on the books of the Insured located in the foreign country.
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CEN for Mobile Assets
Protects an Insured against confiscation of assets by a foreign government. This can also include "Deprivation" which is the inability to re-export the equipment out of the foreign country. This policy is appropriate for assets that will be located temporarily in a foreign country.
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CEN for Inventory and Production Equipment
Protects an Insured against confiscation of their inventory or production equipment
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Currency Inconvertibility
Protects an Insured against the inability to remit profits and dividends from a foreign operation to the home country. Only available in conjunction with a CEN policy.
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Business Interruption
Coverage for loss of net income resulting from a confiscation may be available on a case-by-case basis in conjunction with a CEN policy. Coverage would indemnify the Insured for losses during a six-month period.
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Deprivation of Collateral
Covers an Insured against the risk of being unable to exercise their rights with respect to collateral in a foreign country that is secured under a loan agreement. This also covers the inability to convert or transfer funds outside a foreign country after the sale of the collateral.
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Repossession of Leased Asset
Protects an Insured (usually a finance company) against the right to repossess assets in a foreign country when such repossession is allowable under the terms of a lease agreement.
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Contract Frustration
Export contract loss to a Public Buyer due to political events outside the control of both the Insured (Exporter) and the Public Buyer.
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Contract Repudiation
A Public Buyer's failure or refusal to perform their contract duties and responsibilities. The failure or refusal to reimburse the Insured for work performed, services rendered or pay event driven sums due under the contract.
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Contract Frustration for Private Buyers
Losses due to transfer risk (the inability of a foreign private buyer to obtain foreign exchange to make payments to the Insured), license cancellation, embargo and non-payment of promissory notes and guarantees.
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Embargo/Import-Export License Revocation
Losses resulting from export or import license cancellation, or implementation of law that prevents the export/import of goods or services and thus prevents the Insured from fulfilling their duties under the contract.
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Exchange Transfer/Currency Inconvertibility
Losses caused by the operation of a law, order, decree, etc. in the foreign country that prevents, restricts, or controls the full transfer of funds.
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Unfair Calling - Bonds or Standby L/C
Draw down by a Public Buyer of bid or performance, guarantee, retention bonds or L/C without just cause. Also addresses events of call following other actions of the Insured's or Buyer's Governments, i.e. following an embargo.
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Arbitrary Award Refusal
The refusal of a Public Buyer to honor a contract award ruling from an International Arbitration Panel.
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Non-Ratification
Loss of mobilization expenses if non-ratification is caused by non-fulfillment of conditions precedent to the contract, political events, and certain Force Majeure events outside the control of Insured and Public Buyer.
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Non-Delivery of Goods
Losses incurred due to non-delivery of goods for political reasons. Typically, the Insured has prepaid for the goods against a promise of some future delivery date.
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Barter/Countertrade Related Covers
Situations wherein goods or services have been delivered and accepted by the Buyer but the exchange goods have not been delivered. Non-delivery may be due to a law preventing import to the Seller's country, or other Force Majeure events.
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War Related Covers
Losses due to war, hostilities, civil war, rebellion, revolution, insurrection, guerrilla activity, civil commotion or other like disturbances.
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Non-Honoring of Letter of Credit
The failure of the opening bank to honor its obligations under the letter of credit.
