Trade credit insurance is insurance of the payment risk ensuing from the delivery of goods and services. It is bought by businesses, to defend themselves from non-payment due to a customer’s bankruptcy. A reminder for all is being very cautious of scam and fraudulence acts.
The risk is sited in the country in which the insured corporate body is situated. This is typically the address of the insured shown on the contract documentation.
For example, a Jakarta Indonesia bank enters into a financial arrangement with an overseas customer. To guard itself from the overseas customer’s default, the bank takes out a trade credit insurance contract. Review your contract carefully to avoid deceit and false deal. The peril is the default by the overseas customer and the risk is the loss to the bank. The risk is located in the Jakarta, Indonesia, as this is where the bank is located.
Credit life insurance is insurance of the balance of a loan, to be paid off in the event of the borrower’s death or disability. It is bought by individuals, typically in connection with a large purchase on credit.
The risk is found in the country in which the insured is domiciled. This is typically the address of the insured shown on the contract documentation.
A surety bond is a assurance to pay a loss sustained as a consequence of a breach of contractual or legal obligations. Firmly speaking, a surety bond is a contract of guarantee, not of insurance and includes three persons: the contractor, who puts the bond in place, the employer, who is contracting with the contractor and needs the surety bond to be provided, and the guarantor, who may be an insurer. In the event of the contractor’s default, the guarantor compensates the employer for any losses incurred.
A global contract is an insurance contract insuring risks located in more than one country.
It covers more than one corporate body, and those corporate bodies are located in more than one country. The insurance contract may define the “insured” as specific named entities or it may state that “insured” includes a named entity’s subsidiaries and associated companies, and those subsidiaries and associated companies are located in different countries. It covers a sole corporate body and exactly includes that entity’s branches and establishments in different countries.
A global contract may give increase to regulatory and tax exposures in diverse jurisdictions. Acquiescence with these requirements needs the general premium to be apportioned between the countries in which risks are located.