Structured Credit Insurance

Volatility associated with dramatic changes in geopolitics, the unknown impact of quantitative tightening and changing commodity supply and demand patterns, has heightened both the perception of risk and the exposure to disruption in the supply chain.

It is often difficult for our clients to foresee emerging risks. Increased risk volatility often leads to an increase in failures to deliver or pay for multiple reasons, which translates into heightened credit risk.

Financial parties such as banks, equity investors, corporates and large commodity traders are often concerned about multiple risks when lending to their customers. The risks of non-payment or non-performance can be a challenge to manage for banks and non-financial institutions.

Our diverse, global and creative team of specialists works as your agent and problem solver to overcome concerns or challenges, and work out a strategy to leverage your business volumes. We believe insurance contributes to the growth of your business as well as providing crucial protection in unstable circumstances.

We find opportunities where others see challenges. Our entrepreneurial culture and exclusive analytical ability helps clients to identify and realise opportunity in volatility.

WHAT WE DO

Structured credit

We collaborate with international insurance markets across all geographies to offer comprehensive structured credit insurance for our clients, which provides protection for non-payment, non-delivery and/or non-honouring of an agreement for any reason. Our clients apply this product to a wide range of financial obligations including trade/non-trade related or asset secured loans.

Risk mitigation with comprehensive, non-cancellable, structured credit insurance products can help our clients keep a robust balance sheet, expand into new territories, increase capacity for larger or complex transactions, reduce capital costs and enhance net returns. It can also help to strengthen relationships between them and their customers.

Structured credit

Credit agreements between our clients and their customers can be complex and are frequently one-off and/or have high value contractual arrangements. These agreements are often long-term with sculptured payments and increased security. Structured credit insurance products reflect the terms of the underlying contract, mitigating the credit and performance risks faced during the business transaction.

Our experienced, diverse and global team has strong relationships with insurers in all markets. We strive to ensure that our clients’ specific requirements are incorporated by working closely with these specialist insurers, including acting as a market maker, to deliver tailor-made policies.

FAQs

We recommend early engagement – even on a conceptual basis - because CPS insurances may often be a core component of securing trade or investment and the risks are transient. The more information the insured is able to share on the underlying transaction, the more meaningful the feedback we can deliver will be. When a deal is in its very early stages, we may provide general and/or theoretical feedback as the risks will continue to evolve and change. This feedback can be used to help enhance deal structures and develop risk management strategy.

We can provide you a proposal form to complete which we can then take to the market.

Alternatively, we may request:

  • details of the counterparty
  • contract terms and conditions
  • information about insured goods/services
  • law and jurisdiction
  • payment terms
  • experience you have had with the counterparty.

For short term trade credit insurance multi-buyer policies we ideally need a list of all customers, credit limit requirements, annual sales and payment terms.

By the insurers? The policy is cancellable by the insurers ONLY for the non-payment of premium by the insured.

By the insured? This policy is cancellable by the insured by written notice to insurers. Any premium in excess of the minimum and deposit that is unearned but already received by insurers shall be returned to the insured. Similarly, any premium in excess of the minimum and deposit that is earned but not yet received by insurers shall be payable by the insured.

You must notify the insurer as soon as possible (within a maximum of 30 days) and provide proof of loss within 90 days. From day 1 to day 90, you must act to minimise the effect of the loss. After day 90, underwriters will deliberate the claim and may request further evidence and information. Typically, by day 165 after the loss has been reported underwriters make a final decision on the validity of the claim.

There are some standard template proof of loss forms which are usually included as an appendix in a policy. If your policy has one of these, then this will need to be filled out and submitted to JLT.

If no proof of loss form is included, then the provision of proof of loss will need to include the following:

  • written confirmation by the insured that there has been a default under the insured transaction (email is sufficient).
  • proof that you have taken measures to retrieve the overdue payment from the obligor such as copies of emails or letters chasing for payment.
  • summary of action taken by the insured to pursue payment from obligor.
  • supporting documents – contracts, correspondence concerning activity to mitigate loss

In addition to the above there may further information relating to the insured transaction that is requested by underwriters in order to process the claim. This will vary depending on the specifics of the policy wording.

Key Stats

Managing $100 BN of insurance capacity at any one time1st broker to achieve support for real estate finance and derivative business in 20141st  broker to secure agreement from Lloyd’s to name banks as policyholders1st  broker to offer clients a Basel II compliant wording in 2008

WHY JLT

Structured credit

Clients wishing to purchase insurance for structured credit risks need to ensure that they select a broker with the relevant skills, knowledge and expertise in their business sector. We believe insurance contributes to the growth of your business as well as providing crucial protection in challenging circumstances.

We find opportunities where others see challenges. Our entrepreneurial culture and exclusive analytical ability helps clients to identify and realise opportunity in volatility.

Our multilingual team handle broking services for clients globally including many of the world’s leading corporations, financial institutions and government/multilateral agencies.

As a CPS client you will benefit from:

  • access to a diverse global team to deliver creative, comprehensive risk and insurance solutions which facilitate growth, reduce capital costs, improve returns, secure people and assets
Structured credit
  • ideas and products that positively impact risk mitigation and risk transfer strategies allowing you to make business decisions with confidence
  • our ability to create capacity to underwrite new and evolving risks
  • proprietary analytical tools to ensure you have access to complete and accurate real-time information which enables fact based decision making
  • experienced resources available where you need them without hierarchical, geography or financial barriers
  • consistent engagement through advisory, structuring, placement and claims, drawing in management leverage and technical expertise to ensure that when losses do occur we maximize recovery and minimize the impact on your operations.

Case Study

Credit Risk Coverage

A large commodity trader who was new to the credit and political risk market required credit risk coverage for an important buyer who was sold oil on open account terms.

The commodity trader (the insured) needed comprehensive non-payment insurance to enable an increase in trade volumes with their trading partner which they were currently unable to do due to internal counterparty limits. Credit insurance would hold higher exposure to the buyer but was also a vital ingredient for their banking lines required to finance the trade volume.

The buyer on which credit coverage was sought was a challenge for insurers. This was due to country risk, existing market commodities and creditworthiness – particularly for a new insured to the market.

We worked closely with the insured to understand their specific requirements, level of risk they were able to retain and where we could consider bespoke alterations to their usual terms and conditions. We were then able to advise the insured of the merits of an excess of loss structure versus traditional co-insurance, as well as our expertise and knowledge of the market to estimate the lower pricing which may be achievable in line with this.

The insured, via JLT, was then able to make a proposal to the credit and political risk market which was arguably more attractive than what other long standing trader clients were offering to insurers.

Claims Capabilities

We deliver results. We deploy all resources to help resolve complex losses and deliver claim payments. Our track record is unblemished.

Our clients have confidence that the insurance policies we arrange for them are expertly structured and written by experienced insurers with strong track records in paying claims. Our approachable brokers work alongside our meticulous claims professionals who specialize in handling, managing and negotiating claims.

In the unfortunate event of a loss:

  • You would have a single point of contact with overall accountability for all losses wherever they occur
  • Our proactive claims handling process would help maximize your recovery under your program, while minimizing the intrusion and interference to your on-going operations
  • We would leverage our strong relationships with the major leaders, loss adjusters and lawyers to help expedite the claims process
  • You would have access to our sophisticated pre-loss consulting and effective post-loss recovery services.

CPS ANALYTICS

Our starting point when structuring a new policy is to precisely understand your needs. Our brokers sit alongside a team of risk analysts drawn from security, technical and academic backgrounds.

Their substantial knowledge is utilised to help us understand the precise nature of your risk profile, thereby assisting us in determining the right insurance solution for your requirements.

Using ground-breaking modelling and rating tools, such as Sunstone and World Risk Review, our analysts can pinpoint risks, map exposures, analyse the risk triggers, and evaluate probable maximum loss (PML) ratios across a portfolio of assets.

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