Credit Insurance Glossary

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A

Adverse information

Events or circumstances that have led or may lead to a deterioration in the financial situation or creditworthiness of a buyer or a country of a buyer.

Aggregate first loss

The total amount of approved claims during an insurance period, which are to be borne by the insured for their own account prior to indemnification by the insurer.

Assignee (Loss payee)

A party to whom (by authorisation of the insured) the legal rights to a claim payment under a policy is transferred.

B

Binding order (Pending order, Binding contracts)

An order from which the insured cannot be released if the buyer’s financial soundness is deteriorating. Under pre-defined conditions, credit insurance may be offered for such contracts even after withdrawal of the credit limit.

Blind cover

A policy feature that provides (a reduced percentage of) cover when no credit limit has been established on the Buyer and no adverse information is known.

Buyer (Debtor)

The business entity to which an insured sells their goods or services.

C

Claim (Notice of claim)

An application by the insured for indemnification of a loss under the policy

Claims ratio

Claims payments and expenses divided by gross earned premium and premium related revenue.

Claims threshold (Non qualifying loss, Threshold)

The amount below which losses do not qualify for indemnification and are to be kept by the insured for their own account.

Claims waiting period (Claim filing waiting period, Waiting period)

The period, usually starting from the due date of payment or intervention order, after the expiry of which a claim may be submitted and the loss is assessed.

Client (Insured, Policyholder)

Party that purchases the insurance policy and assumes responsibilities and obligations under that policy.

Co-insurance (uninsured percentage, Self insured percentage, Retention, Retained risk)

The percentage of each insured loss that is not indemnified by the insurer and that the insured has to bear for its own account.

Collateral

Assets, rights or guarantees pledged as security by the buyer or by a third party on behalf of the buyer for the extension of credit by the insured to the buyer.

Collections costs

The costs incurred in preventing or minimising the loss or in collection of the amount owing by the buyer.

Commencement of cover (Transaction date)

The date on which the insurance begins to take effect (at date of order or transaction, delivery or shipment, completion or performance of services) for each individual trade transaction covered under the policy.

Comprehensive cover

1. Insurance covering the entire sales turnover of the insured (opp. Single risk cover);
2. insurance for both commercial and political risks.

Consignment

Possession of goods by a consignee with the obligation to pay the supplier after the sale to a third party or when using the goods

Country rating (Country rank, Country risk classification)

An indication of creditworthiness of a country

Credit limit

The maximum exposure specifically approved or otherwise authorised by the insurer in respect of a buyer.

Credit term (Credit period, Payment term)

1. The period after delivery or shipment of goods or after rendering of services at the expiry of which
invoices are due to be paid;
2. the period of time provided by the insured to the buyer for repayment of delivered goods or services.

D

Date of ascertainment of loss (Date of loss)

1. Date on which the insured loss will be assessed by the insurer;
2. date on which the insured loss is deemed to have occurred.

Datum line

An amount below which buyers are not to be included in the insurance policy.

Declaration of outstanding balances

The specification of outstanding balances (typically at end of the month) on the buyers covered under the policy for the purpose of premium calculation.

Declaration of turnover (Shipment report, Insured transactions report)

The specification of the invoiced turnover on the buyers covered under the policy for the purpose of
premium calculation.

Deductible

The amount of loss that must be absorbed by the insured before indemnification under the policy.

Default (Payment default)

The failure of the buyer to meet their contractual (payment) obligations. A default is an event that can lead to a loss for the credit insurer, such as bankruptcy, Chapter 11 (or any other failure to pay of the buyer) which is covered under the insured’s policy.

Delivery

Making the goods available to the buyer or any person acting on their behalf at the place and on the terms specified in the sales contract.

Delivery period

The period between date of order and delivery or shipment of goods.

Deposit premium

(Instalments of) premium paid in advance, to be adjusted on receipt of the declaration of turnover or outstanding balances.

Discretionary limit (DL, Discretionary credit limit, DCL, Non-vetting limit)

The amount up to which, according to given guidelines, the insured may set a credit limit without specific review by the insurer

Domestic business

Transactions with buyers domiciled in the same country as the insured.

Due date

Date by which the buyer must pay their debt according to the sales contract or invoice.

Duty to notify

Obligation of the insured to notify the insurer of changes of insurable turnover as indicated on the
applications form for the policy, adverse information or overdue accounts.

E

Each and every first loss

The amount to be deducted from each claim payment to be kept for the account of the insured.

Effective date (of the policy)

The date on which the policy comes into force.

Endorsement (Policy clause)

An addendum or enhancement to the policy conditions.

Excess of loss (XL, XoL)

Insurance, cover or indemnification in excess of an amount of first loss to be borne by the insured.

Exchange risk

Fluctuation in the buyer’s currency against another currency, which may affect the buyer’s financial ability to pay its obligations.

Export credit insurance

Insurance against the credit risk related to the sale of goods to buyers in another country.

Extension of due date (Due date extension, Deferral of payment)

Granting of a credit term longer than originally agreed upon in the sales contract.

Extension period (Maximum extension period)

The maximum due date extension allowed under a policy.

F

First order cover (First sale clause)

A policy feature that provides cover for risks commencing before a credit limit has been established, for buyers with whom the insured has not traded before.

G

Guarantor

An individual or company that gives a promise or assurance that an obligation owing from the buyer to
the insured will be paid.

I

Imminent loss

Any events or circumstances that have lead or may lead to a high possibility of a claim.

Indemnification

Compensation for a loss.

Insolvency (Bankruptcy)

A judicial or administrative procedure whereby the assets and affairs of the buyer are made subject to control or supervision by the court or a person or body appointed by the court or by law, for the purpose of reorganisation or liquidation of the buyer or of the rescheduling, settlement or suspension of payment of its debts.

Insured (Policyholder, Client, Named insured, Primary insured)

The party that purchases the insurance policy and assumes responsibilities and obligations under the policy.

Insured transaction (Insured obligation, Insured buyer obligation)

An obligation owing from a specific buyer to the insured and falling within the scope of the insurance contract.

Insurer

The party offering insurance policies for premiums, an underwriter.

Joint insurance

Insurance offered by more than one insurer for their combined account.

J

Joint insured (Additional named insured, Co-insured)

A party, which together with the insured, purchases the insurance policy and assumes specified responsibilities and obligations.

Joint insurer

An insurer offering insurance policies in cooperation with one or more other insurers for their combined account.

L

Losses occurring policy

A policy under which cover is conditional on the date of the cause of loss occurring within the policy period.

M

Main insured

The leading insured acting on behalf of a group of joint-insured.

Main insurer

The leading insurer acting on behalf of a group of joint insurers.

Maximum credit terms (Maximum payment terms)

The longest credit period approved for a buyer under the policy.

Maximum liability (Policy limit, Aggregate limit, Insurer’s maximum liability, Maximum Sum Insured)

The maximum amount that the insurer is liable to pay in respect of all losses during a policy period.

Minimum premium

The agreed minimum amount of premium to be paid for a specified period regardless of the volume of declared turnover or outstanding balances.

Minimum retention

The minimum amount of each loss that the insured has to bear for their own account.

N

Natural disasters (Acts of God)

The manifestation of a natural force that is beyond the control of the insured, buyer, guarantor or government.

No claims bonus (No claims credit, Low claims bonus)

An amount or percentage provided to the insured as a reduction of premium owed, depending on the claims
ratio of the policy.

Non binding indication (NBI, Quotation non-binding, Quote non-binding)

An insurer’s written offer of policy terms and conditions, subject to change by the insurer.

Non-cancellable limits

Credit limits which remain valid for the duration of the policy period and cannot be cancelled by the insurer. Cover, however, may be automatically deactivated on the occurrence of certain defined events, e.g. rating downgrade, overdue payments etc.

Non qualifying loss (Claims threshold, NQL, Threshold)

The amount below which losses do not qualify for indemnification and are to be kept by the insured for their own account.

O

Offer of cover

An indication of conditions for cover based on information given on an application form.

Overdue account (Past due account, Defaulted account)

A buyer’s obligation that has not been paid by its due date.

P

Payment default (Default)

The failure by a buyer to make payment for delivered goods or services by the due date specified in the
invoice or sales contract. A default is an event that could lead to a loss for the credit insurer such as bankruptcy, Chapter 11 (or any other failure to pay of the buyer) which is covered under the insured’s policy.

Payment term (Credit period, Credit term)

1. The period after delivery or shipment of goods or after rendering of services at the expiry of which
invoices are due to be paid;
2. the period of time provided by the insured to the buyer for payment for delivered goods or services.

Percentage of cover (Insured percentage, Guaranteed percentage, Covered percentage)

The percentage of each insured loss that is indemnified by the insurer.

Policy currency

The currency in which all financial transactions or amounts under the policy are denominated (credit limits, indemnifications, costs, premium, deductibles etc.).

Policyholder (Insured client)

The party that purchases the insurance policy and assumes responsibilities and obligations under the policy.

Policy limit (Aggregate limit, Annual maximum liability, Maximum Sum Insured)

The maximum amount that the insurer is liable to pay in respect of all losses during a policy period.

Political risk (Country risk)

1. The risk that a government buyer or country prevents the fulfilment of a transaction or fails to meet payment obligations in time;
2. a risk that is beyond the scope of an individual buyer or falls outside the individual buyer’s responsibility;
3. the risk that a country prevents the performance of a transaction;
4. the risk that a country remains in default to transfer to the country of the insured the moneys paid by buyers domiciled in that country.

Post-shipment risk

The risk of non-payment arising after the delivery of shipment of the goods or completion of the performance of services.

Pre-credit risk (Contract risk, Pre-shipment risk, Work in process)

The commercial risk of insolvency of a buyer before delivery or shipment of the goods or performance of
a service, and/or the political risk of any interruption of the manufacturing of the goods or performance of a service.

Premium

The sum of money paid to buy an insurance product.

Profit share

1. An arrangement whereby the insured can receive back a portion of premiums paid according to certain
conditions (usually dependent on the claim ratio of the policy).
2.The distribution of a percentage of the profits of the policy back to the insured according to certain conditions (usually dependent on the claim ratio of the policy).

Protracted default (Default)

The failure by a buyer to pay the contractual debt within a pre-defined period calculated from the due date or extended due date of the debt.

Public buyer (Government buyers, Government debtors)

The entity to which an insured sells its goods or services and that is;
1. authorised to enter into commitments in the name or on behalf of the government of its country, including the government itself, government agencies or any public sector institutions;
2. majority-owned by a government;
3. an entity whose commitments are guaranteed by the
government.

R

Recoveries (Salvage)

Proceeds received from the buyer or a third party, whether before or after a claim has been indemnified.

Renewal

The prolongation of a policy or a credit limit after expiry of their validity or after a specified period of time.

Retained risk

The part of a loss which is not indemnified by the insurer and for which the insured must bear the loss
without recourse to any other party.

Retention of title (ROT, Reservation of title)

A condition in a sales contract which reserves the seller’s right of product ownership until the seller has received full payment.

Risks Attaching policy

A policy under which cover attaches based on shipment dates and where the shipment date (but not necessarily the loss) must occur within the policy period.

Run off cover

Continuation of cover of risks, where the cover commenced before withdrawal of a credit limit or the
expiry of a policy until payment or until the occurrence of a covered cause of loss.

S

Salvage (Recoveries)

Proceeds received from the buyer or a third party, whether before or after a claim has been indemnified.

Single buyer cover (Single debtor / Single risk cover, Transactional cover, Specific Account)

Cover for all sales to one debtor or for a single contract with one debtor (as opposed to whole turnover and key buyer).

T

Third country risk

Exposure to economic and political risks in a country other than the country of the insured or of the buyer; usually a country through which shipments may pass or where the goods are to be delivered, or the services to be performed.

Top-up cover (Excess insurance)

Additional coverage over a credit limit established by the same or another insurer.

U

Uninsured percentage (Co-insurance, Retained risk, Retention, Self-insured percentage)

The percentage of each insured loss that is not indemnified by the insurer and that the insured has to
bear for their own account.

Unspecified customer (DCL buyer / debtor, Unnamed buyer / debtor)

A buyer for which, according to given guidelines, the insured may set a credit limit without specific review by the insurer.

W

Waiting period (Claim filing waiting period)

The period, usually starting from the due date of payment or intervention order, after the expiry
of which a claim may be submitted and the loss is assessed.

Whole turnover policy

A credit insurance policy that covers the insured’s total credit sales (as opposed to Key buyer cover and Single risk cover).

Work in progress (Pre-invoicing expenses, Costs incurred but not billed)

Expenses incurred for uncompleted rendered services or product construction.

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