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Medium Term Credit Insurance

Medium Term Credit Insurance, provides financial institutions, exporters and infrastructure developers with private sector corporate payment default coverage for one to seven years. Underwriters typically extend this coverage in conjunction with a cross border financing of goods and/or other services. Coverage can also be procured for non-trade related finance, where the financing will be utilized for general corporate purposes or in a project finance transaction, provided that the underlying corporate obligor can satisfy underwriter capital to debt ratio requirements.

This information is provided for your general guidance only, You need to work with an expert insurance broker to craft the right solution for you. We can recommend one if you are interested.

Typical policy coverage includes:

  • Terms of 1 to 7 years;
  • Capacity up to US $100 million (with syndication) per transaction; and
  • Flexibility to cover a wide variety of emerging market transactions.

Key benefits of coverage:

  • Increases ability to take on credit exposure by relieving balance sheet constraints;
  • Provides financial institutions with a more transparent alternative to loan syndication and credit default swap markets; and
  • Enables insured to expand business with customers requiring additional credit.

Transaction Types

  • Bank loans and other debt issuances;
  • Financing of deferred payment terms;
  • Pre-export facilities; and payment obligations under off-take contracts.

Political Risks Insurance

Designed for emerging market exposures, political risk insurance can be tailored to meet the needs of financial institutions, businesses, and investors. The coverage is written to protect the policyholder from a complete or partial loss due to either arbitrary government intervention or sovereign default.

Coverage can include currency inconvertibility and expropriation, equity investment, political violence, and arbitration award default. Whether you are manufacturer, trader, lender or equity investor, we can customize your coverage to meet your specific need.

Typical policy coverage includes:

  • Terms from 1 to 15 years
  • Up to U.S. $500 million
  • Indemnity of 90-100%
  • Flexibility to cover a variety of emerging market transactions

Key benefits of coverage:

  • Leverages insured’s ability to assume foreign government credit exposure
  • Eliminates non-commercial investment risks
  • Enhances credit ratings of foreign government debt issuances
  • Protects collateral security

Transactions might include:

  • Bank loans and other debt issuances
  • Energy and natural resource mining interests
  • Emerging market infrastructure development projects;
  • Structured financial transactions

FACETS OF POLITICAL RISK COVERAGE INCLUDE

Sovereign Non-Honoring – Debt and guaranty default coverage for a wide variety of transactions. Underwriters will also consider quasi-governmental risk without sovereign guarantees provided that the country meets minimal investment grade criteria.

Currency Inconvertibility and Expropriation of Funds – government measures that prohibit the otherwise legal conversion of profits, dividends, equity, or trade receivables into the insured’s currency of choice. Coverage may also be procured for the expropriation or freezing of funds related to loans and investments.

Expropriation of Equity Investment – government acts that deprive ownership rights through either out right takings or “creeping expropriation”, license restrictions and cancellation, forced withdrawal orders by home government, forced divestiture, and the implementation of trade restrictions by either the home or host government.

Political Violence – loss attributable to terrorists, riot, or activist groups that impair or destroy key operating assets.

Arbitration Award Default – arbitration awards sanctioned by an agreement between the insured and relevant government entity.

 

Summary

Medium Term Credit Insurance and Political Risk Insurance are often combined in a comprehensive solution to permit multi-nationals, exporters, financial institutions, commodity traders, fixed income securities investors, and others to do business in emerging markets with greater assurance of a successful outcome.