Credit risk insurance and export credit agency (ECA) guarantees play an important role in facilitating trade, whether that is in commercial supply chains, large projects or complex financial transactions. The product has, arguably, never been more important. The collapse of a number of well-known names in the UK high street in recent months has brought a renewed focus on the benefits of credit insurance. Indeed the ability to secure credit risk insurance is sometimes seen indicator of the financial health of a company. In recent years, financial institutions have also increasingly looked to credit risk insurance as a way of maximising capital relief.
It is of course vitally important to ensure at placement that credit risk insurance wording is appropriate for the underlying transaction and will respond if there is a credit default. Credit risk policies often impose ongoing requirements on insureds, which must be complied with in order to maintain cover. And when claims do arise, insurers typically expect strict compliance with the claims procedures set out in the policies.
Many of these issues were explored at the ExCred Insuring Project and Commodity Finance Conference sponsored by Herbert Smith Freehills LLP, which took place in London on 12 September 2018. In their presentation on maximising claim recoveries, Sarah McNally (Partner), Anthony Dempster (Partner), Fiona Treanor (Senior Associate) and Sarah Irons (Professional Support Consultant) used a case study to explain some of the issues we see arising in practice in credit risk insurance claims. The topics covered included:
- Challenges faced by insureds in complying with their duty of fair presentation under the Insurance Act 2015
- The importance of complying with notification provisions
- Issues which can arise in supply chain finance transactions when the debtor is allowed to exceed the relevant exposure limits
- The practical challenges faced by insureds in complying with claims procedures in credit risk policies
- How to mitigate losses and the problems that can arise with recovery actions and subrogated claims
- Dispute resolution mechanisms available
If you have any questions about credit risk insurance and ECA guarantees, or would like to receive our credit risk insurance health check brochure, please do not hesitate to contact us.