Book contents
- Frontmatter
- Contents
- Foreword
- Introduction
- Disclaimer
- Chapter 1 What is trade?
- Chapter 2 What is trade credit insurance?
- Chapter 3 Product types
- Chapter 4 Risk types
- Chapter 5 Typical set-up of a trade credit insurance contract
- Chapter 6 Premium, the price for cover
- Chapter 7 Day-to-day policy management
- Chapter 8 Buyer risk underwriting in trade credit insurance
- Chapter 9 Debt collection
- Chapter 10 Imminent loss and indemnification
- Chapter 11 Renewal, expiry, termination of a policy
- Chapter 12 Single risk business
- Chapter 13 The single risk insurance market: Private and public players
- Chapter 14 Reinsurance of Trade Credit Insurance
- Trade Credit Insurance resources
- Glossary of trade credit terminology
Chapter 10 - Imminent loss and indemnification
Published online by Cambridge University Press: 18 January 2018
- Frontmatter
- Contents
- Foreword
- Introduction
- Disclaimer
- Chapter 1 What is trade?
- Chapter 2 What is trade credit insurance?
- Chapter 3 Product types
- Chapter 4 Risk types
- Chapter 5 Typical set-up of a trade credit insurance contract
- Chapter 6 Premium, the price for cover
- Chapter 7 Day-to-day policy management
- Chapter 8 Buyer risk underwriting in trade credit insurance
- Chapter 9 Debt collection
- Chapter 10 Imminent loss and indemnification
- Chapter 11 Renewal, expiry, termination of a policy
- Chapter 12 Single risk business
- Chapter 13 The single risk insurance market: Private and public players
- Chapter 14 Reinsurance of Trade Credit Insurance
- Trade Credit Insurance resources
- Glossary of trade credit terminology
Summary
A trade credit insurance policy provides the insured with cover
• for the non-payment risk;
• for insured debts;
• against insolvency of the buyer;
• provided that all policy conditions have been complied with.
According to the policy conditions the insured has to notify unpaid debts with a certain timeframe and ask for intervention of the insurer to collect the debt. The insurer will assess whether the insured has complied with all policy conditions and is eligible for cover and start the debt collection. In case all policy conditions have been met, indemnification will be made to the insured after the occurrence of a loss as described in the policy and the debt collection will be pursued, if possible. The indemnification and the allocation of recoveries will be dealt with at the end of this chapter.
THE NON-PAYMENT RISK
The supply of goods or the rendering of services on credit terms implies the risk for the supplier that payment will not be made in due course, and a loss occurs. This is the non-payment risk which can be divided into:
• the pre-credit or production risk: the risk that an order has to be cancelled during the production of goods, because the risk of non-payment due to financial problems of the buyer is too big; production costs already incurred cannot be recovered;
• the commercial risk: the risk that the buyer cannot pay the outstanding debt because of financial problems;
• the country risk or political risk: the insured does not receive payment of the outstanding debt because of political circumstances such as shortage of foreign currency, (civil) war, strikes, political unrest, natural disasters or non-payment by governmental buyers such as ministries, provinces, & municipalities.
Trade credit insurance provides cover for the above mentioned risks. One of the conditions for cover is that the debts qualify as insured debts.
INSURED DEBTS
The conditions of a credit insurance policy may include an explicit description of the causes of loss that are eligible for cover (positive risk description) or the causes of loss that are excluded from cover (negative risk description). Some policies contain a combination of both.
- Type
- Chapter
- Information
- A Guide to Trade Credit Insurance , pp. 83 - 94Publisher: Anthem PressPrint publication year: 2015