What kinds of credit insurance programs are available?

Coverage is available generally on either a single-sale or portfolio basis. A seller asking to insure just one sale is often presumed to have a relatively risky transaction in mind (otherwise, why insure it?), whereas agreeing to insure a broad portfolio of sales made on credit terms permits the leveraging of not-so-desirable risks along with the desirable ones. 

Underwriters clearly prefer the portfolio concept, and provide price and coverage incentives to steer sellers away from the single-sale approach.

Commercial insurers require only a "reasonable" spread of risk in a portfolio. This means that a program could be designed to attract an underwriter using, say, all accounts over $25,000 or all accounts in Latin America… Ex-Im Bank, on the other hand, requires that all eligible sales on credit terms be insured under a Multi-Buyer policy, with very few exceptions. 

ERM prides itself on being able to design cost-effective programs to match a seller's needs with an underwriter's expectations and requirements. We are also recognized for our ability to translate technical insurance language into clear, understandable instructions.

Single sale "Medium-Term" policies are available, mainly from Ex-Im Bank but also some commercial underwriters, for export sales of capital goods and equipment with credit periods ranging from one to five years. This coverage typically involves a downpayment of at least 15%.

How does a Multi-Buyer (portfolio) policy work?

There are two key features to most Multi-Buyer policies, which typically cover selling terms up to 180 days:

Buyer Approval: Each customer is approved for a credit limit either automatically, or upon specific application. 

The criteria for automatic approvals, called a Discretionary Credit Limit, include either a complete credit file for new customers, or satisfactory prior payment experience for existing customers. 

The specific approval process involves the submission of underwriting information (credit report, financial statements, etc.) to the underwriter (some insurers do their own investigations, so clients just submit names and limit requests). Decisions are usually made within 3-5 working days. Approvals are generally good for 12 months, and there is usually no charge to put them in place.

Premium Payment: Many policies permit the insured to "pay-as-you-go," by reporting at the end of each month the shipments made on credit terms during the preceding month, and paying the appropriate premium with the report. Other policies feature deposit premiums that are adjusted quarterly or annually based on actual shipments.

How does a Single Buyer policy work?

Single Buyer policies, whether Short- or Medium-Term, are underwritten individually, and premium is normally paid in full prior to policy issuance. There is no other reporting required.

One advantage of Single Buyer policies is that, as a rule, once issued they cannot be cancelled by the underwriter. This is particularly important when selling to customers in high-risk countries.

What is the broker's role?

ERM's role is to help identify the client's needs, and to assist in designing a program to best address the situation. The answer can be a simple, one-off Single Buyer policy, or a blend of Short- and Medium-Term policies with several underwriters.

Once a potential structure is ready, we help complete the necessary application(s), and negotiate terms and conditions with as many underwriters as are appropriate to the client's needs. We then implement the resulting policy(ies), and monitor the ongoing coverage to ensure the best possible coverage at the lowest cost. We also assist in obtaining credit reports and in claim filing procedures, and are always available for consultation.

There is usually no, or minimal, additional cost for ERM's assistance, as we are compensated by the underwriters. 

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This is a description of certain features of typical insurance policies. Your policy may be different. The actual terms and conditions are contained in the applications, policy text, and endorsements. This is not a solicitation of coverage, which can only be made by a licensed insurance broker or authorized representative. Please read our disclaimer.

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