Trade 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.

Traders in consumer and industrial goods and services may be concerned about the impact of account receivable losses to their business. Opportunities to expand sales by supplying to new markets may not be exploited due to the need to protect cash-flow and balance sheet against non-payment.

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

Trade Credit Insurance

We work with global traders to organise their credit insurance which can provide security when extending credit to new or established counter-parties. It can be used by our clients to protect their balance sheet and increase confidence when trading in/with higher risk territories or buyers, or simply to manage their own internal counter-party exposures.

Risk mitigation with a comprehensive, non-cancellable, credit insurance product can remove entry barriers and allow our clients, whether they are a supplier or manufacturer, to facilitate and increase trade. It mitigates the risk of contractual default (either non-delivery or non-payment) by either a public or private buyers.

Credit risk associated with this sector is often short-term (<360 days) which tends to be the preserve of the whole turnover trade credit insurers. Traditionally these insurers cover all eligible transactions of a manufacturer or supplier in agreed period, typically 12 months.

Trade Credit Insurance

Where complex, one-off and/or high value contractual arrangements are required the structured credit insurers have appetite for tenors of 12 months to 15 years. Bespoke in nature, the insurance product reflects the terms of the underlying contract, mitigating the credit and political risks faced during the pre and post shipment stage of a transaction.

Our approachable and proactive worldwide team work closely with our clients in identifying, understanding and analysing their risks, which in turn allows us to make recommendations to mitigate potential losses and organise a custom-made insurance policy, however complex it may be.

We leverage global experience and local service to deliver solutions that work.

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

Trade Credit Insurance

Clients wishing to purchase insurance for trade 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
Trade Credit Insurance
  • 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 maximise recovery and minimise the impact on your operations.

Case Study

Mitigating Financial Loss

A European manufacturer had entered into a contract with an Asian power company for the supply of electrical substations, which would take six months to produce. Terms of the contract confirmed that the power company would provide a 20% advance payment and then pay the remaining 80% in monthly instalments over 24 months.

We worked closely with the insured to understanding the costs involved prior to the substation shipment, ensuring that the client was aware that if the contract was frustrated or the goods prevented from being delivered, then finding an alternative market would be difficult.

Following a full review of the manufacturer’s business including internal procedures and sector expertise, we coordinated conference calls and compiled an insured/insurer question and answer document to assist with the sharing of risk information.

We structured and negotiated a pre and post shipment comprehensive credit insurance policy with leading A rated insurers. This allowed the insured to mitigate against a financial loss from the costs prior to delivery in the event that the contract is cancelled when the buyer has no reason to do so or frustrated for political reasons, and also mitigate against the risk of default after delivery for up to 90% of the contract value.

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 CPS claims professionals who specialise 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 maximise your recovery under your programme, while minimising 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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