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Trade credit insurance—essentials

Trade credit insurance—essentials Trade credit insurance typically provides protection to a policyholder against non-payment of accounts receivable, due to the protracted default (ie a failure to pay an invoice after the due date has passed) or insolvency of its buyers or a political risk. Credit insurance accordingly seeks to remove the credit risk from the policyholders' balance sheet, thereby improving their profit and loss accounts. Bad debt provisions may also be reduced as a result. Trade credit insurance Types of risk insured Trade credit insurance risks are ordinarily classified into commercial and political risks: • a ‘commercial risk’ is typically defined as the insolvency of the insured's buyer resulting in a payment default or the buyer's failure to pay for the goods on the due date • a ‘political risk’ is typically defined as the risk that a government buyer or country prevents the fulfilment of a transaction or fails to meet its payment obligations. Examples include: ◦ regulatory or legislative payment freezes ◦ expropriation and...

Insurable interest

Insurable interest This Practice Note considers insurable interest, including insurable interest in construction and liability insurance. It also considers insurable interest in subrogation, co-insurance and double insurance and the Insurable Interest Bill. What is insurable interest? ‘Insurable interest’ refers to a doctrine of insurance contract law that requires the insured to have a relationship with the insured subject-matter that is recognised by law. Broadly speaking, only persons who have some relation to the subject-matter of the insurance contract, by reason of which they would be prejudiced by its loss, or may incur liability in respect thereof, can insure that subject-matter. Conversely, a person who has no such relationship does not have any insurable interest and therefore cannot take out insurance on that subject-matter. The burden rests on the insured to prove an insurable interest exists. The historic rationales for requiring an insurable interest are that: • it is characteristic of an insurable interest that distinguishes an insurance contract from wagering contracts (the ‘anti-wagering rationale’) • an insurable interest...

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Ireland—Debenture: single company chargor—bilateral—all monies

Bilateral debenture for a chargor incorporated as a limited company in Ireland to secure the chargor’s obligations to the lender on an all monies basis Using this Precedent Debenture This is a precedent bilateral Debenture which can be used to take security over all of the assets of a company. This drafting note explains the context in which this precedent Debenture might be used as well as the features of this precedent Debenture and the assumptions on which it is based. Negotiating a security package—general principles A lender's primary concern is that it is repaid. If a borrower fails to repay a loan the lender may have to go to court to obtain a judgment for payment of the sum owed to it. Even if it obtains such judgment this does not mean that the lender will be repaid in full or even in part. For example, if the borrower is insolvent, the lender may have to share the borrower's available assets with other creditors and will only receive part...

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What is the difference between joint insured, co-insured and composite insured?

What is the difference between joint insured, co-insured and composite insured? In financing and construction documentation for development projects it is usual to see requirements for parties to arrange insurance so that a lender, or other interested party, is joint insured, co-insured or composite insured—but what is the difference? Co-insured Referring to ‘co-insurance’ can mean either joint insurance, or composite insurance. Either way, being co-insured will offer the lender, or other interested party, greater protection than it would if it only has its interest ‘noted’ on the policy. Joint insured In a joint insurance policy, both parties share identical interests. Each party therefore shares the same risk and only one policy of insurance is created. As there is only one policy shared by both parties, one party’s acts or omissions could cause the insurer to vitiate the policy (eg for non-disclosure or fraudulent claims). It is common therefore that if a lender has agreed to be ‘joint insured’, for it to request non-vitiation language in the insurance...

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Construction in 2023—reviewing the second half of the year and looking forward to 2024

Construction analysis: In this article, we review some of the major developments and issues that the second half of 2023 presented, and consider what may be coming in 2024.

Insurance & Reinsurance weekly highlights—14 September 2023

This week's edition of Insurance & Reinsurance weekly highlights includes: updates relating to the Ukraine conflict, COVID-19, market practice, regulatory developments, cases & decisions, dates for your diary and other news highlights reported over the past week.