Credit Insurance

Aims of the course

Providing goods/services on credit or deferred payment terms is - inter alia - vital to win business, but may expose companies and financial institution to wide range of political and credit risks of their defaulting or bankrupt buyers/debtors. Therefore, the main objective of the course is to well acquaint the students with credit insurance services as one of the most rapidly evolving and frequently used financial instrument and security against payment default risk in commercial transactions. With deep understanding of commercial and non-commercial risks of non-payment in credit transactions and awareness of importance and different methods of credit risk management for undisturbed and profitable contemporary business, the students will acquire multidisciplinary (business, financial and legal) theoretical and practical expertise in credit risk management (based on case studies) as well as solid specialized knowledge and understanding of main features, basic principles of credit insurance and related topics, including its various functions, credit insurance conditions and policy management in commercial praxis, strategic planning and decision making in day-to-day operations of the company.

Course syllabus

1. Introduction and course overview through fundamental trade dilemma: trade finance and assumption of inherent risks by buyers and/or vendors.
2. Commercial and non-commercial risks inherent to business transactions on deferred payment terms and advanced credit risk management.
3. Credit insurance and reinsurance market overview and detailed description of main functions of credit insurance to boost sales and exports with the risk transfer to underwriter and enhanced external financing, including its preventive and curative functions and auxiliary services: credit information with buyers'/debtors’ credit limits and country-risk reports, risk monitoring, debt collection, claims payment and recoveries.
4. Analyzed main features of insurance cover for short-term supplier credits in exports and domestic trade on proportional and non-proportional basis, whole turnover, spread and specific account insurance coverage with the aim to avoid the insured's adverse selection of risks and moral hazard (asymmetric information).
5. Terminology, basic principles and credit insurance conditions including credit and supplementary pre-shipment (manufacturing) risk coverage for defaulting or insolvent debtors, eligible trade receivables, pricing, deductibles and conditionality of credit insurance with prescribed disclosure, reporting and other duties of the insured parties.
6. Underwriting and legal specifics of credit insurance class, main content and legal characteristics of applicable laws and applied general insurance conditions as integral parts of credit insurance contracts.
7. Practical description of procedures and credit insurance policy management starting from request for insurance, set and altered (revolving) buyers' insurance limits, followed by insurance declarations, insurance premiums invoiced and paid, notices of payment default, debt collection activities, ascertainment of loss, claims handling and subsequent recoveries of losses.
8. Advantages and disadvantages of credit insurance v. other substitutional or complementary financial instruments, e.g. letters of credit, bank guarantees, self-insurance, invoice discounting, factoring, forfaiting and alternative capital market instruments.
9. Nature, specifics and insurability of non-marketable risks and Export Credit Agencies' medium-term export credit and investment insurance schemes including international regulatory framework (WTO, OECD, EU and Berne Union).

Course director(s)