Non-Payment Protection for Banks, Lenders & Investors
Financial institutions, specialty lenders and investors use credit insurance to protect payment instruments, trade finance facilities, general corporate loans, and other financial assets against default on scheduled payments.
Financiers may purchase policies for their own account or choose to be nominated as a “loss payee” under a borrower’s policy.
Coverage typically offers 90% indemnity with repayment terms of up to seven years and maximum limit of liabilities as high as $150MM per insurer for any single risk.
Why do Financial Institutions and Lenders Buy Credit Insurance?
Banks and specialty lenders have become one of the largest purchasers of credit insurance coverage in recent years. The product’s broad applicability and flexible policy wordings offer benefits to financial institutions and lenders of all sizes. Advantages conferred by credit insurance policies include, but are not limited to, the following:
Meet an individual financial institution’s standards for a qualified risk mitigant under Basel II/III
Maintain competitive advantage by holding assets on the books as opposed to selling assets or seeking a risk participation from another financial institution
Increase lending capabilities via management of internal individual obligor and / or country limit constraints
Expand a client’s borrowing base to include typically ineligible foreign accounts receivable under traditional asset-based lending facilities
What is Eligible for Coverage?
• Confirmed and Standby Letters of Credit
• Bankers Acceptances
• Trade Acceptances (drafts)
• Loans (Bilateral and Syndications)
• Diversified Payment Rights (DPRs) / Securitizations
• Working Capital Lines of Credit
• Standby Letter of Credit Issuance Facilities
• Accounts Receivable Securitizations
• Import and Export Financing
• Purchased Accounts Receivable
• Accounts Payable Financing
• Traditional Asset-Based Lending