Insurance contract

Types of insurance coverage:

  • Short-term account receivables,

  • Production risk, Pre-shipments, Pre-credit risk,

  • Political risks,

  • Projects,

  • Specific coverages.

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Insured risks:

  • Defaults from formal insolvency of the client (court-protected restructuring or bankruptcy),

  • Informal defaults, e.g. protracted payments.

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Excluded transactions:

  • Advance payments, prepayments,

  • Guarantees,

  • Letter of credits (L/Cs),

  • Non-recourse factoring,

  • Sales to related companies (Intercompany sales),

  • Possibility to exclude public buyers.

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Types of contracts:

  • Turnover (TO),

  • Balance (BAL).

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Credit limits:

  • The insurance company sets a credit limit for each buyer included in the trade credit insurance. This limit means the maximum possible exposure (amount of outstanding receivables) to the buyer which insurance policy covers in case of loss event.

  • The size of the limit can be affected by several different criteria. Some of the criteria are the amount of annual sales to the buyer, sales dynamics (potential seasonality pattern of sales), agreed payment terms together with the tolerated delay, etc.

  • The insured may either exclude buyers below a certain limit (e.g. EUR 5,000, EUR 10,000, EUR 20,000, EUR 50,000, etc.) from the insurance or include it in the insurance under the clause of discretionary or automatic limits.

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Self-retention:

  • Self-retention represents the insured's own participation in case of loss event. For example, if a loss event in the amount of EUR 100,000 occurs and the insurance contract stipulates a self-retention rate of 10%, the insured would receive an insurance indemnity in the amount of EUR 90,000, and the insured's own share would be EUR 10,000. We tailor the self-retention percentage to the needs of our client. It can be traded-off against a lower insurance premium.

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Dunning costs:

  • are costs incurred in connection with external debt collection activities and are borne by the insurance company subject to any applicable self-retention percentage. 

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Presented are only some of the contents or parameters of the insurance contract. If you are interested in a more detailed presentation on the content, feel free to contact us. Our team would be happy to answer all your questions (free of charge).