RENEWAL

Most whole turnover policies include conditions for automatic renewal, which occurs at the end of the insurance period, unless the insurer or the insured wants to terminate the policy and notifies the contractual partner with due observance of a notification period of (mostly) two months.

The insurer may decide to renew the policy under the condition of an increased premium rate, because of the negative results under the policy, the deterioration of the creditworthiness of buyers and countries insured under the policy or the implementation of increased premium rates for all his buyers. After timely announcement of new (premium) conditions and a possible negotiation with the insured, the policy may be renewed or not.

Many policies contain a bonus/malus arrangement by which the insured can expect a decrease or increase of the premium rate, depending on the claims ratio of the policy. The calculation of the claims ratio requires special attention.

Under a ‘risk attaching’ policy the claims ratio should be calculated by taking into account the premium paid for credit risks commenced in an insurance period and allocating possible claims to the same period. Late indemnifications or recoveries may lead to an adjustment of the claims ratio and its consequences for the premium in a new insurance period.

Some insurers and many insured prefer a calculation of the claims ratio on a cash basis. Regardless of the insurance period in which the risks commenced, they take the premium paid during the last insurance period and the indemnifications paid in the same period, by some insurers decreased by the recoveries received by them during the last insurance period.

In case the insured is entitled to receive a bonus, one of the conditions may be that the policy will be renewed.