Most insurance organizations offer the same basic policies to their clients. Examples from the Hong Kong Credit Insurance Corporation are given in Box 9.4.
BOX 9.4: EXAMPLES OF PULlCltS FROM 71!-. 4GNC KONG CRE'Jif iNSURANt» \ll\Wy?. ¡0-
■t t'i|oi.Li<^' i>i del.iv Hi fniri^n I'M-li iVMi'it hko • Cancellation of import licences i • Payment moratorium
. i\ i! d<siiiiKi:ii es ,in.l :i<.llii;.il ilis.isli'r-¡■•I .-II event--nl li"-- tin- m.i\imiiin pi-i\onl.i;.-.i- ol iiuli'innilv i-vii". '-■I .mi! -iicit'iim unhM-priscs polic\
0 Insolvency and bankruptcy j » Default in payment
© Failure or refusal'to take delivery utgoodn Country risks, covered
ISIru l-,i;-i-oi ili'Kn in loivis'.n i-Ni-li.ingi- n-nnlLim r ® Cancellation of import licences
« Payment moratorium j ® War, civil disturbance and natural disasters
In general the mechanics of the policy process would operate as outlined below.
1. A company would apply to a credit agency to insure them against non-payment by a foreign organization buying their goods or services.
2. The credit agency will fully investigate the international customer before accepting the risk.
3. The agency will then fix the premium according to the commercial and political perception of the risks in the market concerned.
4. The company completes its transaction with the international customer and gets paid.
5. If payment is not forthcoming then the credit agency can help to collect the overdue account or seek legal assistance.
6. If the debtor defaults, the company is covered by the terms of the agreement, and any salvage collected is shared pro-rata among the parties who have an interest in the debt.
For established relationships, companies can often operate within a discretionary limit without having to approach the credit agency on a case by case basis. For example with Trade Indemnity you can agree a credit limit on each of your customers when you trade above an agreed level. Below this agreed limit (the discretionary limit) the company uses their own sources of information on financial status and trading experience to justify their trading. As long as the company trades within the parameters of the credit limits, and abides by any other conditions of the policy, then it will be covered in the event of one of its customers failing.
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