Credit Insurance

Trade Credit Insurance

Credit insurance, where available, seeks to cover the risk that the purchaser may become insolvent or otherwise default on payment. Credit insurance operates in a similar fashion to a letter of credit to some extent.

Trade credit insurance is not widely available in Ireland. Historically, it has been considered expensive, time-consuming to administer and had narrow policy terms and conditions. Unsurprisingly, coverage for more risky creditors is less likely to be available. The insurer may retain the right to cancel or reduce cover if the risk changes.

In export trade, there are alternative trade financing mechanisms which may provide a significant measure of security and which seek to collect payment directly against the delivery of the title documents to the goods.

As with insurance contracts generally, the insured trader owes a duty of good faith to the insurer. He must disclose all matters material to the risk. The insured is usually under a continuing obligation to notify underwriters of any material change to the information supplied in any proposal form or of any other material facts affecting the policy. Failure to disclose material facts may result in the insurer avoiding the policy.


Former State Schemes

Formerly trade credit insurance was offered by the Department of Jobs, Enterprise and Innovation and its predecessors. The Insurance Act 1953 as amended permits the Minister to extend state guarantees to promote the exports of Irish goods and services.

The last scheme thereunder was withdrawn in 1998 on the basis that it was no longer required. The export credit section of the Department retains responsibility for export credit insurance issues arising from the scheme. Since then, export credit insurance has been provided by the private sector. Export credit finance is now provided by the financial institutions and insurers on a commercial basis only.

There is a separate general State credit guarantee scheme under the Credit Guarantee Act 2012 as amended. It applies to SME firms (those qualifying as micro, small, and medium enterprises). It is not material for trade credit as such.


Types of Risk Covered

Commercial (buyer) risk may be available to cover risks, such as the buyer’s refusal to accept the shipment, refusal to pay, default on payment or its insolvency. Default arises where the buyer/customer has accepted the goods (or services rendered) but fails to make payment on the due date.

The cover may be available in respect of a named buyer. The insurer may offer blind cover on a lower indemnity based on criteria. The cover may be based on trading experience and evidence. The leading purchasers only may be covered.

Selected market policies may be available to cover risks, in particular, markets, with particular risks.

Political risk insurance insures against some “political” risks. In particular, it may cover the action of governments, war, civil disturbance, insurgency, governmental blocks on payment, governmental blocks on the transfer process and exchange control restrictions.

Pre-shipment risk deals with cases where bespoke goods are made to order. Insurance may cover the period prior to the dispatch of goods and may include credit and political risks.


Policies

Shorter-term policies account for most export credit insurance. They are commonly used in relation to fast-moving commercial goods, agri-products and consumable goods. They usually provide cover for periods between 30 and 180 days.

The following are the principal types of cover:

  • single risk cover where one buyer only is covered;
  • top-buyers cover where the principal buyers are covered;
  • multi-buyers cover where a selection of buyers is covered:
  • whole turnover where all buyers are covered;
  • political risk
  • advance payment protection

The insured trader may carry a significant level of excess (and therefore risk retention) in order to reduce the premium.

Longer term policies for several years may cover capital and infrastructure projects.


Supply Chain

The insurer may insure the trader’s bank against the failure of its customers to repay the bank cash advances which it has made to the customer suppliers. The customer determines which supplier is to be paid.

Supply-chain finance involves the insurer covering the bank against the failure of its customer to repay the bank, the cash advances made to the customer’s suppliers. The facility is made available through the bank to its suppliers.

Trade receivables financing covers the bank when it purchases and funds a block of trade receivables.


Exclusions

Trade credit insurance typically does not cover;

  • VAT and other Taxes.
  • disputed debts; until resolved;
  • incorrect buyers – incorrect principle to contract;
  • late reporting of overdue accounts or adverse events;
  • amounts exceeding the endorsed credit limit;
  • sales after the maximum period of overdue tolerance;
  • sales made on terms of payment not permitted by the policy;
  • incorrect use or calculation of discretionary limit cover;
  • sales to private individuals;
  • sales to a buyer known to be insolvent;
  • sales over an applicable credit limit for the buyer;
  • breach of sale contract or regulatory requirements;
  • noncompliance with policy terms and conditions.

Extent of Cover

The following are some variables on the extent and nature of cover;

  • cancellable cover; most insurers can cancel or reduce cover if they feel that the risk has deteriorated.
  • non-cancellable cover; some insurers offer non-cancellable cover for the duration of a policy.
  • discretionary cover – some insurers allow cover without getting an endorsed limit – justified by trading experience, a credit report or industry knowledge.
  • blind cover – an insurance company may offer a non–vetting policy, usually with a lower indemnity, based on certain criteria.

Administration

A credit limit or favourable rating may be required to be established on every insurable buyer/customer. The cover must be obtained on the correct contractual buyer. Care must be taken that the credit limit or rating is obtained on the correct buyer to the contract.

Any overdue account which remains unpaid for (e.g.) 30 days after payment was due may be required to be reported immediately or in any event no later than a set period after delivery of goods/performance of services. Where an account is known to be in financial difficulties or an event likely to lead to a loss arises, there is usually an obligation to report the account immediately the trader becomes aware of the circumstances.

The trader must notify the insurer immediately as soon as the trader becomes aware of any customer that goes into insolvency. A claim must be submitted no later than a set period after the notification has been made to


Credit Limits or Rating

A credit limit or sufficient credit rating may be required to be established for every insurable buyer/customer by written approval from the insurer. The insurer’s sufficient credit rating scale may comprise several scoring levels, with each level reflecting the credit exposure that could be accepted on a particular company.

The trader may be able to determine the creditworthiness of its buyers online, and the insurer may accept this as sufficient evidence of rating. If a buyer is not known to the insurer, then it may research the buyer with the aim of obtaining a rating. It may offer cover or a higher limit than the credit rating provided, by payment of a higher premium.

The amount of the Credit Limit should be for the highest amount owed by the buyer/customer at any one time. It determines the maximum insured amount on any one buyer/customer, subject to the insured percentage or the excess.

The insurer may find it necessary to vary, reduce or withdraw a credit limit or sufficient credit rating on occasions. Normally, it will be as a result of the insurer receiving adverse information on the buyer. If a credit limit or sufficient credit rating is amended or withdrawn, the trader will not be covered for further deliveries/services to the buyer/customer after the effective date of the cancellation, unless the contract / policy otherwise provides.

The insurer may also review its commitments on buyers and countries from time to time and may request details of the customer’s own experience to assist them in assessing particular exposures.


Notification of Overdue Accounts

The trader is required to take all practical measures to effect payment and to prevent and minimise loss. Timely notification to the insurer of potential bad debts is essential. Accounts that remain unpaid at the defined time limit for notification, including disputed debts, are reportable.

The trader may also be obliged to notify the insurer of certain other accounts or circumstances which arise, including those which are:

  • outstanding at the defined time limit for notification, e.g. 150 days after the original invoice date;
  • causing major concern or known to be in financial difficulty, e.g. bounced cheques.
  • the subject of legal action;
  • in insolvency, as defined;
  • subject to major re-scheduling of the debt beyond the maximum credit period.

Any repayment or rescheduling plans, which exceed the defined maximum credit period, must have prior agreement from the insurer if cover is to be maintained

The trader is required to notify the insurer

  • as soon as it becomes aware of any adverse
  • information concerning a buyer/customer;
  • as soon as the trader is aware of an Insolvency, or
  • as soon as an account is unpaid 150 days after the original invoice date.

Once an account reaches the defined time limit for notification (TLN), cover under the credit limit is automatically suspended and any goods subsequently dispatched (or services rendered) will not be insured, unless the overdue amounts are the subject of a documented dispute. In the event of a claim arising following a dispute, the trader will be required to provide a record of the dispute or queries and subsequent resolution in the insured’s favour.


Claims

The contractual documentation required to support a claim may be required to be submitted no later than (e.g.) 6 months from the date of notification. Specified documents will be required. They may include

  • proof of insolvency;
  • confirmation/acknowledgement of Debt from the Insolvency Practitioner or nominated official;
  • credit limit approval
  • a period of prior trading experience of the account, if appropriate, to check prudent trading, the level of indebtedness, allocation of payments etc.;
  • in the event of an unwritten contract, sufficient commercial documents substantiating the buyer’s contractual obligations;
  • copy invoices, evidence of dispatch and acceptance of goods
  • copies of correspondence evidencing attempt to minimise the loss;
  • details of the insured’s attempts to enforce retention of title (if applicable).

The insurer may agree to pay valid claims within a fixed period (e.g.30 days) of receipt of evidence of the buyer’s Insolvency and any requested supporting documentation;


Recoveries

Recoveries are all sums, including uninsured amounts, received after the occurrence of

an insured cause of loss. A recovery would include the following:

  • any security or guarantee realised;
  • any credit note that is raised;
  • any proceeds from goods recovered, kept or resold.

Following a claim payment, all recoveries up to the value of the claim belong to the insurer with any balance returned to the insured.

The cover may include collection services. These may be pre-legal collection services and

legal collection services.


References and Sources

Consumer Law  Long      2004

Commercial Law White  2nd ed    2012

Commercial & Economic Law in Ireland  White    2011

Commercial Law Forde  3rd ed    2005

Irish Commercial Precedents (Looseleaf)                               2004

Modern law of personal property in England and Ireland Bell 1989

Commercial & Consumer Law: Annotated Statutes O’Reilly           2000

UK Texts

Schmitthoff: The Law and Practice of International Trade 13th ed Carole Murray, David Holloway, Daren Timson-Hunt, Schmitthoffs 2018

Damages Under the Convention of Contracts for the International Sale of Goods 3rd ed Bruno Zeller 2018

International Economic Law 4th ed Asif Qureshi, Andreas Ziegler 2018

Law of International Trade: Cross Border Commercial Transactions 6th ed Jason C.T. Chuah 2018

World Trade Law: Text, Materials and Commentary 3rd ed 2018

The International Sale of Goods 4th ed Michael Bridge 2017

International Trade Law 6th ed Indira Carr, Peter Stone 2017

International Institute for the Unification of Private Law 2nd ed (UNIDROIT) 2017

Understanding the CISG Understanding the CISG 5th (Worldwide) ed 2017

The Law and Policy of the World Trade Organization: Text, Cases and Materials  2017

International Trade Law and Regulation:: Michael Blakeney, Aline Doussin, John Clarke, Mark Clough, 2017

International Sale of Goods: A Private International Law Comparative Edited by: Nicolas Nord, Gustavo Cerqueira 2017

International Sales Law Edited by: Franco Ferrari, Clayton P. Gillette 2017

The CISG Advisory Council Opinions Edited by: Ingeborg Schwenzer 2017

World Competition: Law and Economics Review – Editor in Chief: Jose Rivas 2017

Making Money with Incoterms 2010:  Strategic Use of Incoterms Rules in Purchases and Sales Arthur O’Meara 2017

World Trade Organization: Law, Practice and Policy World Trade Organization: Law, Practice and Policy 3rd ed Mitsuo Matsushita, Thomas J. Schoenbaum, Petros C. Mavroidis, Michael Hahn 2017


Sample Policy

1. The Insurer ’s agreement in general

1.1 Parties to this agreement

This Factoring Trade Credit Insurance Policy is between the Insured and

the Insurer as declared in the Schedule. This document, together with its

Schedule and any attached endorsements is the Policy which sets out this

insurance. It is a legal contract so please read all of it carefully.

1.2 Policy structure

Section 2 sets out the scope of main coverage and some circumstances in

which the Insurer ’s liability to the Insured is limited, or may be excluded.

The cover provided by section 2 is only operative if stated as ‘insured ’ in

the Schedule.

Section 3 sets out circumstances in which the Insurer ’s liability to the Insured

is limited or excluded, as well as setting out other terms and conditions

Section 4 sets out the Insured ’s duties in the event of a claim or potential

claim including conditions precedent.

Section 5 sets out general terms and conditions including conditions

precedent.

Section 6 sets out definitions and interpretation.

1.3 Capitalised words

Capitalised words used in this Policy document, other than in the headings,

have defined meanings as set out in section 6, the Definitions and

interpretation section of this document.

1.4 Policy Period and premium

The Policy will provide insurance for the Policy Period provided the premium

and Other Charges are paid to and accepted by the Insurer on or before

each payment date shown in the Premium and Instalments Schedule.

Taxes, levies and other relevant fiscal charges are payable in addition to the

premium and Other Charges which are set out in the Policy Schedule.

The premium and Other Charges are deemed paid and accepted on receipt

of cleared funds by the Insurer.

If any premium or Other Charges (including any instalment of premium or

Other Charges) are not paid to and accepted by the Insurer on or before

the relevant payment date shown in the Premium and Instalments Schedule,

the Insurer can give written notice to the Insured at its address shown on

the Schedule cancelling the Policy with effect from the thirtieth (30th) day

after the notice has been served, but that cancellation will be prevented

from taking effect and the Policy will continue if the late premium or Other

Charges or instalments of either and any other remaining premium or Other

Charges or instalments are paid and accepted before the cancellation takes

effect. Without prejudice to other forms of service, notice of cancellation is

deemed to be served on the third (3rd) day after being posted if sent by

pre-paid letter post properly addressed.

The Insurer in its payment of any claim that exceeds 100% of the total annual

premium has the right to set off any outstanding premium and Other

Charges owed. The provisions of this clause are subject to any additional

or adjustment premium or Other Charges which may become owing to

the Insurer, which will be payable in addition.

1.5 Limit Management Charges

Limit Management Charges will apply throughout the Policy Period and

will include the number of searches and Credit Limit Endorsements the

Insured uses. All searches and charges will be specified in the Schedule

and will be due for payment on or before the dates shown in the Premium

and Instalments Schedule.


2. Insured section – What is covered

2.1 Trade credit cover

Subject to the terms of this Policy, this insurance provides cover to the

Insured for the Insured Percentage of the Insured Loss arising from a

Claimable Event as defined in the Schedule provided that each Insured Debt

arises from Shipments made during the Policy Period shown in the Schedule:

(a) to Insured Buyers in Approved Countries;

(b) made in the course of the Insured ’s business specified in the Schedule

and in accordance with the Credit Management Procedures; and

(c) that are invoiced to the Insured Buyer within the Maximum Invoicing

Period.

2.2 Limit of liability

The Insurer ’s liability will not exceed the Maximum Policy Liability and any

amount in excess of the Maximum Policy Liability will be for the account of

the Insured.

2.3 Permitted credit limits

This insurance provides cover to the Insured in respect of an Insured Buyer

either:

(a) where the Insured has a Credit Limit Endorsement and the Insured

has acted within the terms and conditions of it; or

(b) where no Credit Limit Endorsement is effective, the Insured must,

prior to Shipment, have established a Permitted Credit Limit within

the specified Discretionary Credit Limit in the Schedule. In setting the

Permitted Credit Limit, the Insured must adhere to its Credit

Management Procedures and comply with the terms of any specific

endorsement contained in the Schedule. The Insured must record

in writing all Permitted Credit Limits and each must be justified by

information no more than 12 months old from the date of the oldest

dated Shipments in relation to which a claim is made under this Policy.

The Insurer may at any time, and at the Insurer ’s sole discretion, give notice

in writing to the Insured of a reduction in or cancellation of a Permitted

Credit Limit or any Approved Country. Any notice of reduction or

cancellation issued by the Insurer will apply to all Shipments of goods or

services rendered occurring at any time after the date of the notice. Nothing

contained in this clause should be construed as limiting in any way the

effect of the limitation and exclusion clause Excluded Shipments.


3. Limitations and exclusions

3.1 Limitations and exclusions

This Policy excludes and does not cover losses:

Consignment stock agreements

arising out of contracts for sales on a consignment stock basis unless the

Insurer agrees to such contracts by specific endorsement;

Contracts exceeding Maximum Terms of Payment

arising out of contracts in which the terms of trade granted to an Insured

Buyer exceed the Maximum Terms of Payment as specified in the Approved

Countries & Conditions Table in the Schedule;

Disputed indebtedness (Disputes)

involving any indebtedness which is the subject of a dispute between the

Insured and an Insured Buyer, pending final resolution of such dispute in

the Insured ’s favour by determination or agreement. Following resolution

of the dispute any amounts determined or agreed owing to the Insured,

must be paid by the Insured Buyer within thirty (30) days of the date of

such resolution or the expiry of the Maximum Extension Period whichever

is the later. Thereafter the sum will be overdue constituting a Notifiable

Event. Any Maximum Extension Period is hereby deemed to be adjusted

to include any such thirty (30) day period;

Excluded contracts

in respect of contracts with or between the Insured or the Supplier and:

(a) any group companies, associated companies, parent company or

subsidiary companies of the Insured or the Supplier;

(b) a Public Buyer;

(c) a buyer resident outside the Approved Countries;

(d) any registered charity;

(e) where the contract is a Consumer Contract;

Excluded Shipments

in respect of Shipments made in one or more of the following circumstances:

(a) to an Insured Buyer who is insolvent;

(b) to an Insured Buyer whose debt to the Insured or any part thereof

is overdue beyond the specified Maximum Extension Period for any

reason other than a legitimate dispute in which case the provisions

of the Disputed Indebtedness limitation and exclusion clause will

apply;

(c) after the applicable Permitted Credit Limit has been cancelled or

reduced, and as a result is no longer available;

(d) outside the Approved Countries;

(e) where the Insured is aware or ought in the ordinary course of

business to be aware of a Notifiable Event in respect of the Insured

Buyer;

Legally enforceable indebtedness

(a) in respect of Shipments where any of the licences or approvals or

other authorisations necessary for due performance of the contract

of sale of goods or services has not been obtained;

(b) in respect of Shipments where the Insured or any of its agents or

assigns, has failed to comply with any law, order, decree and

regulation of any competent authority of the relevant Approved

Country or has failed to comply with any law, order, decree or

regulation of any competent authority of any other country with

jurisdiction over the Insured;

Losses arising from a dishonest or illegal act

arising directly or indirectly from or caused by any dishonesty or illegal act

by the Insured or a director, officer or employee of the Insured;

Losses arising from a nuclear event

arising directly or indirectly from or caused by employing any process of

nuclear fission or fusion or handling radioactive material including the use

of nuclear reactors, the use of radioactive materials, the use of any weapon

of war or explosive device employing nuclear fission or fusion;

Losses arising from Political Risks or Terrorism

arising directly or indirectly from or caused by Political Risks or Terrorism

or a combination of any of these;

Non-credit terms

in respect of Shipments made by the Insured for cash in advance, cash on

delivery or in any circumstance where the Insured has intended not to grant

a credit period, including any failure of a cash based instrument which

inadvertently gives rise to a credit period;

Pay when paid contracts

in respect of Shipments related to any form of “pay when paid ” contracts;

Rescheduling of debt or renegotiating terms of trade

after any repayment renegotiations or changes to the terms of trade beyond

the Maximum Extension Period unless approved in writing by the Insurer

Shipments made after the Insured is insolvent

in respect of Shipments made by the Insured at a time when the Insured

was insolvent; or

VAT and other taxes and charges

in respect of that part of any debt which constitutes Value Added Tax (VAT),

Goods & Services Tax (GST), any form of sales tax, retention monies, late

payment interest, interest charges, penalties, government charges and taxes

and consequential losses or damages.

3.2 Sanctions limitation and exclusion

The Insurer will not provide cover nor be liable to pay any claim or provide

any benefit hereunder to the extent that the provision of such cover,

payment of such claim or provision of such benefit would expose the Insurer

or any member of the Insurer ’s group to any sanction, prohibition or

restriction under any United Nations resolutions or the trade or economic

sanctions, laws or regulations of any country.

3.3 Permitted credit limit conditions precedent

The due observance and fulfilment of the provisions of this clause 3.3 is a

condition precedent to the Insurer ’s liability for any claim under this Policy.

Credit management procedures

The Insured must adhere to and follow the Credit Management Procedures.

Insurance controls

The Insured must not without the prior written consent of the Insurer enter

into any other trade credit insurance policy that indemnifies the Insured.

Uninsured losses

The Insured will retain, for the Insured ’s own account,

(a) such part of an Insured Debt as exceeds the Insured Percentage; and

(b) such indebtedness to the Insured of an Insured Buyer as exceeds

the Permitted Credit Limit; and

(c) any deductibles specified in the Schedule; and

(d) all indebtedness after the Maximum Policy Liability or Maximum

Country Liability has been exhausted.


4. Duties in the event of a claim or potential claim

The due observance and fulfilment of the provisions of the whole of this

section are each conditions precedent to the Insurer ’s liability for any claim

under this Policy. The Observance clause at 5.12 sets out the consequence

of a failure to comply with any condition precedent or Policy provision.

4.1 Notification

The Insured must notify the Insurer within fourteen (14) days of when the

Insured becomes aware of:

(a) a Notifiable Event that occurs to an Insured Buyer; or

(b) an amount which is overdue in relation to an Insured Buyer which,

including disputed Shipments, exceeds the Overdue Reporting Limit

after the Maximum Extension Period has expired; and

the Insured must notify and update the Insurer in the format required by

the Insurer at least on a monthly basis or until either a Notifiable Event no

longer exists or a Claimable Event has occurred in respect of that Insured

Buyer.

4.2 Claim conditions

The Insured must:

(a) notify the Insurer of the Insured ’s intention to claim within fourteen

(14) days of becoming aware of any Claimable Event of the Insured

Buyer;

(b) submit a fully completed claim form to the Insurer within three (3)

months of the original date of the claim notification, or the Claimable

Event Date, if earlier;

(c) in the case of Insolvency obtain and submit to the Insurer written

Confirmation of Debt for the whole indebtedness claimed as being

owed by an Insured Buyer from the person authorised to administer

the insolvent estate of the Insured Buyer; and

(d) in the case of Protracted Default obtain the judgment from a court

of competent jurisdiction or local equivalent against the Insured

Buyer in respect of an Insured Debt that exceeds GBP5,000 (five

thousand pounds) or the equivalent in the Policy Currency.

4.3 Due diligence

The Insured must use due diligence and do all things reasonable and

practicable to avoid or diminish any Insured Debt, must act promptly in

accordance with any reasonable instructions that the Insurer gives and

must exercise reasonable care and prudence in granting credit to and

withholding credit from an Insured Buyer as if the Insured were uninsured.

4.4 Insured ’s rights

The Insured must commence any action against the Insurer in relation to

a claim or disputed claim under this Policy no later than twenty-four (24)

months following the Claimable Event Date.

4.5 Insurer ’s rights

The Insured must produce for examination, at any time and at a place

designated by the Insurer or the Insurer ’s representatives, any and all such

documents in whatever medium as may be reasonably required which

relate to any matter arising out of the Policy. The Insured will allow extracts

and copies to be taken without charge and will take all reasonable steps to

obtain such documents that are in the possession or control of third parties.

Where documents submitted in support of a claim are in a language other

than English, the Insured will at their expense provide a certified translation

into English if so required by the Insurer.

4.6 Subrogation

(a) Whether before settlement of any claim under the Policy or at any

time thereafter, the Insured must at the request of the Insurer transfer

or assign to the Insurer all rights and remedies, indemnities and

advantages of whatsoever nature held by or available to the Insured

whether from the Insured Buyer or from other parties for the purpose

of recovering or reducing an Insured Debt in respect of which a claim

has been or is to be paid.

(b) Upon payment of a claim the Insurer will be fully subrogated to all

such rights, remedies, indemnities and advantages of whatsoever

nature held by or available to the Insured whether from the Insured

Buyer or from other parties for the purpose of recovering or reducing

any Insured Debt and the Insured must not, and must procure that

anyone acting on its behalf must not, waive any right of recourse or

recovery against any other person in relation to a Claimable Event.

(c) The Insured will at the request and expense of the Insurer, and

whether before or after the Insurer has paid the Insured ’s claim, do

and concur in doing and permit to be done all such acts and things

as may reasonably be required by the Insurer for the purpose of

enforcing any rights and remedies or of obtaining relief or indemnity

from other parties to which the Insurer will be or would become

entitled or subrogated upon its paying the Insured ’s claim.

(d) For the avoidance of doubt, should the Insurer agree to pay the claim,

the Insured will have a continuing duty to perform the obligations

set out in the Policy and to use every reasonable endeavour to pursue

Recoveries in cooperation with, or on behalf of, the Insurer.

4.7 Recoveries

(a) The Insured must notify the Insurer in writing immediately it receives

any Recoveries and any Recoveries received by the Insured or the

Insurer are to be held on trust for the Insured and the Insurer for

their respective interests as specified in (b) below.

(b) Subject to (g) below, all Recoveries net of reasonable expenses agreed

in writing by the Insurer are to be divided between the Insured and

the Insurer as follows:

(i) the Insurer is entitled to the sum of:

(A) such proportion as the Insured Percentage of the

Insured Debt bears to the total indebtedness of the

Insured Buyer to the Insured at the date of a Notifiable

Event first occurs; plus

(B) any other monies owing to the Insurer for arrears of

premiums or monies due under this Policy; plus

(C) any monies required to maintain the impact of any

deductible; and

(ii) the Insured is entitled to the balance.

(c) Subject to (e) below, the Insurer ’s proportion of any Recoveries

received by the Insured and due to the Insurer (as calculated in

accordance with (b) above) is to be remitted by the Insured to the

Insurer within thirty (30) days of receipt of the Recoveries by the

Insured.

(d) If the Insured receives Recoveries before submitting a claim under

this insurance or, having submitted such a claim, before the Insurer

has agreed to settle it, the Insured will not be required to pay its

proportion of Recoveries to the Insurer. After submission of its claim,

the Insured must promptly give written details to the Insurer of any

Recoveries the Insured has received. If the Insurer has agreed to

settle the claim, the Insurer may deduct the Recoveries from its

calculation of liability under the Policy.

(e) The Insurer may at any time in respect of any Recoveries bring a

claim or take any form of legal action in the name of the Insured

against:

(i) an Insured Buyer; or

(ii) any third party against whom the Insured is entitled to take

action;

and for this purpose the Insured must provide all assistance and

cooperation requested by the Insurer in accordance with the

subrogation provisions at 4.6 above.

(f) In the event the Insurer elects to bring such a claim or take legal

action against an Insured Buyer or any third party against whom the

Insured is entitled to take action, the Insurer is entitled to deduct from

any Recoveries all of the costs, disbursements and expenses incurred

by it, prior to apportioning the Recoveries as set out in (b) above.

(g) All but sub-paragraph (b) above will apply to Specified Security

Proceeds. Given that the relevant security or guarantee was a special

precondition to the granting of the Permitted Credit Limit, the basis

of appropriation of the Specified Security Proceeds will be as follows,

irrespective of whether it occurs before or after submission of a claim:

Any Specified Security Proceeds, despite any request or instruction to the

contrary from the relevant Insured Buyer or guarantor or any party holding

the security for the benefit of the Insured, will first be applied wholly in

reduction of the Insured Debt (as opposed to total indebtedness), and only

thereafter, will any remaining Specified Security Proceeds be available to

the benefit of the Insured.

4.8 Settlement of claims

Subject to the Insured complying with the terms and conditions of the Policy

and after deducting any interim payments, Recoveries and any applicable

deductible, the Insurer will pay to the Insured the Insured Percentage of the

Insured Loss within thirty (30) days of receipt of a Confirmation of Debt (for

Insolvency claims) or the judgment (if applicable) of a court of competent

jurisdiction (for Protracted Default claims).


5. General terms and conditions

5.1 Aggregate Liability

The Insurer ’s liability under this Policy shall not be additional to any benefit

to which the Insured may be entitled under a previous policy of insurance,

whether the insurer of that previous policy was the Insurer or another insurer

and the Insurer ’s liability under this Policy will be limited to the Permitted

Credit Limit less any amount still owing for goods Shipped and/or covered

under that previous policy.

5.2 Allocation of monies

All amounts received in connection with insured or uninsured Shipments

will be allocated in chronological order of due dates, unless and until the

Insurer’s written consent has been obtained.

5.3 Applicable law and jurisdiction

This Policy and any matters relating to its formation or validity will be

governed by and interpreted in accordance with the governing law specified

in the Schedule.

5.4 Assignment

The Insured shall not assign any rights or benefits under this Policy unless

the Insurer ’s written consent has first been obtained.

5.5 Cancellation

The Insured is not entitled to cancel this Policy, and the Insurer may do so

only in accordance with the terms, conditions and exclusions of the Policy

or by operation of applicable law or regulation.

5.6 Currency

This Policy is issued in the Policy Currency.

The Permitted Credit Limits under the Policy, any other limits or deductibles,

premiums, Limit Management Charges and any Other Charges are

expressed in the Policy Currency, and such amounts will not vary according

to changes in the exchange rate between the Policy Currency and any

other currency, unless the Insurer has expressly given its prior written

consent.

If the Insured disburses a Receivables Purchase Facility in any currency

(including any Approved Claim Currency) other than the Policy Currency,

the value of such Receivables Purchase Facility must be converted into

the Policy Currency for any declaration purposes at the relevant Conversion

Exchange Rate (all such Conversion Exchange Rates must be recorded in

writing by the Insured at or about the time of Shipment of the goods relating

to every invoice, and such records must be provided to the Insurer in the

event of a claim).

For the purpose of calculating the Insurer ’s liability in the event of a claim

arising:

(a) any part of a Receivables Purchase Facility disbursed in a currency

other than an Approved Claim Currency will be converted into the

Policy Currency at the Financial Times Closing Mid-Point exchange

rate on the relevant Claimable Event Date and the resultant liability

is to be paid in the Policy Currency;

(b) any part of a Receivables Purchase Facility disbursed in an Approved

Claim Currency will be converted into the Policy Currency at the

Financial Times Closing Mid-Point exchange rate on the relevant

Claimable Event Date and the resultant liability as determined in the

Policy Currency will be reconverted into and paid in the Approved

Claim Currency, such reconversion being made at the same exchange

rate.

For the purpose of calculating Recoveries in the event Recoveries are

received in a currency other than the Policy Currency:

(c) Recoveries accruing in a currency other than an Approved Claim

Currency are to be converted into the Policy Currency by reference

to the Financial Times Closing Mid-Point exchange rate (between

such currency and the Policy Currency) at close of business on the

day of receipt, whether or not such currency is actually converted

into the Policy Currency on receipt. The Insurer ’s share of any such

Recoveries accruing after payment of a claim must be paid to the

Insurer in the Policy Currency.

(d) Recoveries accruing in the Approved Claim Currency are to be

converted into the Policy Currency at the Financial Times Closing

Mid-Point exchange rate on the relevant Claimable Event Date. The

Insurer ’s share of any such Recoveries accruing after payment of a

claim must be paid to the Insurer in the relevant Approved Claim

Currency.

5.7 Document management

The Insurer may hold documents relating to this insurance and any claims

under it in electronic form and may destroy the originals. An electronic

copy of any such document will be admissible in evidence to the same

extent as, and carry the same weight as, the original.

5.8 Fraud

If a claim is in any respect fraudulent or if any fraudulent means or devices

are used by the Insured or anyone acting on their behalf to obtain any

benefit under this Policy or if any liability, loss, destruction or damage is

occasioned by wilful act or with the connivance of the Insured there will be

no rights to any form of payment or indemnity under this Policy.

Further any payment made to the Insured in respect of any fraudulent claim

or activity must be repaid to the Insurer in full.

5.9 Insolvency of the Insured

In the event of the Insolvency of the Insured this Policy will terminate

immediately. The Insurer will then have no liability under the Policy for any

claims that have not already been submitted at the date of Insolvency.

The Insurer will be entitled to retain all premiums and other monies paid

and to receive and retain all premiums and other monies due and payable

to the Insurer up to and including the effective date of such Insolvency but

always not less than the Minimum Premium.

For the purpose of this condition the definition of Insolvency will be the

same as that applying to an Insured Buyer under this Policy.

5.10 Joint Insureds

In the event there is more than one Insured, each of the Insureds together

will be treated for all purposes under this Policy as a single entity.

Representations by any of the Insureds will be considered representations

of all, and breaches of warranties, conditions or any other terms or provisions

of this Policy by one will be considered breaches by all. The performance

by any of the Insureds of any duty or obligation of the Insured under this

Policy will be considered performance by all. Any limits imposed upon the

Insured under this Policy will apply to all Insureds in the aggregate and not

to each individually.

5.11 Material inaccuracy

The information provided by or on behalf of the Insured in connection with

this insurance (whether at inception or otherwise) must be materially

accurate and not omit material information which is known by the Insured ’s

board members or equivalent and/or the Insured ’s risk manager or ought

to have been known by them following their reasonable enquiry.

Breach by fraud or dishonesty

If the Insured or anyone acting on its behalf breaches this condition (whether

at inception or otherwise) by fraud or dishonest act or omission, the Insurer

may:

(a) avoid this Policy from inception; or

(b) impose such terms, conditions and/or additional premium as the

Insurer may in its sole discretion determine; and

any benefit which the Insured has received under this Policy which resulted

from any such fraud or dishonest act or omission must immediately be

repaid to the Insurer.

Breach by non-disclosure, misrepresentation (other than

fraudulent or dishonest)

If the Insured or anyone acting on its behalf breaches this condition (other

than by fraudulent or dishonest means), the Insurer may:

(a) impose such terms and conditions (effective at inception or otherwise)

as the Insurer would have imposed in the absence of such breach;

and/or

(b) charge such additional premium (effective at inception or otherwise)

as the Insurer would have required in the absence of the breach; and

(c) apply such applicable additional premium, amended terms and

conditions or both to any notified claim or potential claim; and

the Insurer will promptly give the Insured written notice of any applicable

additional premium, amended terms and conditions or both.

Within fourteen (14) days of receipt of such notice, the insured will give the

Insurer written confirmation of:

(a) acceptance of and a promise to pay the applicable additional

premium in accordance with the terms of trade applying to this

insurance; or

(b) the Insured ’s acceptance of the amended terms and conditions; or

(c) both as applicable.

If the Insurer can show to the Insured ’s reasonable satisfaction that the

Insurer would have declined to enter into this insurance at inception or to

accept the proposed amendment to this insurance during the Policy Period

on any terms, the Insurer may avoid this Policy from inception and, if no

claims have been paid or accepted under this Policy, the Insurer will

promptly return to the Insured all premiums received by the Insurer at the

date of breach; and, if the Insurer has paid claims monies under this Policy,

the Insured must promptly repay all such claims monies to the Insurer.

5.12 Observance

The due observance and fulfilment of the provisions of this Policy insofar

as they may relate to anything to be done or complied with by the Insured,

and are not alternatively stated as conditions precedent, will be a condition

of this Policy. Save as may be expressly provided otherwise in the Policy,

no provision of the Policy may be amended, modified, supplemented or

waived except in a written agreement executed by authorised

representatives of the Insured and the Insurer. No action or inaction by

the Insurer will be an affirmation of the Policy or a waiver of any provision

and will not prevent the Insurer from relying on any such term or condition

or condition precedent in the future.

5.13 Online terms and conditions

The Insured acknowledges that additional terms and conditions relating to

and set out in an online support system may apply to the Insured and the

Insured will ensure it and its relevant employees are familiar with all the

terms and conditions contained within the system.

5.14 Other Insurances

It is a condition precedent to the Insurer ’s liability under this Policy that if,

at the time of any claim under this insurance, any other valid credit insurance

is available to the Insured (other than insurance that is specifically stated to

be in excess of this Policy and has been declared to and accepted by the

Insurer), and that other credit insurance covers any Insured Debt in whole

or in part, then the insurance afforded by this Policy will exclude any claim

covered in whole or in part by such other credit insurance.

5.15 Representation

The Insured consents to any person falling within the definition of the Insured

having authority to give any notice to the Insurer and to receive any notice

from the Insurer or its representatives in connection with this insurance.

The Insured acknowledges that payment made by the Insurer of any return

premium to such person falling within the definition of the Insured will

discharge in full the Insurer ’s obligations under the Policy.

5.16 Severability, construction and conformance to statute

If any provision contained in this Policy is, for any reason, held to be invalid,

illegal, or unenforceable in any respect, it is hereby deemed to be severed

and to have no effect on any other valid, legal and enforceable provision

of this Policy.

If any provision contained in this Policy is, for any reason, held to be invalid,

illegal, or unenforceable, it will be construed by limiting it so as to be valid,

legal, and enforceable to the extent compatible with applicable law.

Any provisions of this Policy which are in conflict with the statutes or

regulations of the state wherein this Policy is issued are hereby amended

to conform to such statutes or regulations.


6. Definitions and interpretation

The following words will have the same meaning attached each time they

appear capitalised in this Policy.

Where the context so admits or requires, words importing the singular will

include the plural and vice versa and words importing the masculine will

import the feminine and the neuter. References to ‘a person’ will be

construed so as to include any individual, company, partnership, or any

other legal entity. References to a statute will be construed to include all

its amendments or replacements. All headings within the Policy are included

for convenience only and will not form part of this Policy.

6.1 Approved Claim Currency

Approved Claim Currencies are specified in the Schedule and are the

currencies in which the Insured is entitled to lodge a claim.

6.2 Approved Countries

Approved Countries means those countries which are specified in the

Approved Countries & Conditions Table contained in or otherwise referred

to in the Schedule.

6.3 Claimable Event

Claimable Event in respect of an Insured Buyer means Insolvency, Protracted

Default or any other named claimable event in the Schedule that has

occurred before a claim is submitted.

6.4 Claimable Event Date

Claimable Event Date means the date on which a Claimable Event occurs

and is specified in the definition of the respective Claimable Event.

6.5 Confirmation of Debt

Confirmation of Debt means the written confirmation of a debt owed to the

Insured by an Insured Buyer either:

(a) at the date of Insolvency which is shown within the books and records

of the Insured Buyer; or

(b) will rank for participation in any distribution in the Insolvency of the

Insured Buyer;

by the person authorised to administer the insolvent estate of the Insured

Buyer.

6

6.6 Consumer Contract

Consumer Contract means a contract concluded between the Insured and

a natural person who is acting in his or her personal capacity for purposes

which are outside his or her business, and/or, who would have the benefit

of consumer protection legislation.

6.7 Conversion Exchange Rate

Conversion Exchange Rate in respect of an invoice means the rate of

exchange between the currency in which that invoice is issued and the

Policy Currency, as determined:

(a) by reference to the Financial Times Closing Mid-Point exchange rate

as at the close of business on the day the relevant goods were

Shipped; or

(b) by the forward exchange rate contract, if one has been entered into

with the Insured ’s bank in relation to determining in advance the

amount the Insured is to receive in terms of the Policy Currency, if

payment is made in the Approved Claim Currency as contracted by

the Insured Buyer; or

(c) by reference to the Insured ’s internal treasury rate as agreed in writing

by the Insurer at the inception of the Policy.

6.8 Credit Limit Endorsement

A Credit Limit Endorsement means an endorsement issued by the Insurer

and specifies the approved Permitted Credit Limit in respect of the named

Insured Buyer or specifies that the Permitted Credit Limit is ‘Nil ’ or ‘0’

reflecting that no cover is available. It may contain special conditions adding

to or amending the existing terms and conditions of this Policy in relation

to the Insured Buyer

A Credit Limit Endorsement is retrospective to the start of the Policy Period

unless:

(a) an effective date is stipulated on the Credit Limit Endorsement; or

(b) a ‘Nil ’ or ‘0 ’ Credit Limit Endorsement is in place, in which case the

positive Credit Limit Endorsement will be effective from the date that

it was endorsed; or

(c) a positive Credit Limit Endorsement is in place, in which case the

limit is retrospective to the first positive Credit Limit Endorsement

date following the latest ‘Nil ’ or ‘0 ’ Credit Limit Endorsement

Nothing contained in this definition should be construed as limiting any

way the effect of the limitation and exclusion clause Excluded Shipments.

6.9 Credit Management Procedures

Credit Management Procedures means such procedures relating to or

associated with or consisting of procedures of credit management as may

be described in the credit management questionnaire, Proposal, renewal

form, and the Insured ’s credit control procedures.

6.10 Disbursed or Disbursement

In relation to a Receivables Purchase Facility occurs when the proceeds of

the relevant Receivables Purchase Facility are remitted or otherwise made

available by the Insured to the relevant Supplier (for the purpose of

clarification, such remitting or making available of funds is counted as

occurring as from when the transaction is recorded in the Insured ’s own

accounting records and instructions have been given to the remitter or

transferor of funds, and disregards the time taken for such funds to be

available as cleared funds in the relevant payee ’s account or hands) and

which transaction must be completed within the Policy Period.

6.11 Discretionary Credit Limit

Discretionary Credit Limit means the amount stated in the Schedule and

the terms and conditions relating to the Discretionary Credit Limit that are

advised to the Insured by the Insurer in writing by endorsement.

6.12 Insolvency

Insolvency is a Claimable Event and occurs in respect of an Insured Buyer

when any of the following steps has been taken:

(a) an Insured Buyer initiates or becomes the subject of any procedure

or action or proceedings pursuant to local bankruptcy or insolvency

legislation which is uncontested and results in the Insured Buyer

being recognised at law as being subject to a moratorium or in

external administration or insolvency or winding up in insolvency; or

(b) a court appoints a receiver, liquidator, trustee or other similar external

administrator or official under local bankruptcy or insolvency

legislation to administer all or substantially all the assets of an Insured

Buyer; or

(c) a composition by an Insured Buyer has been approved by a court

having jurisdiction or a compromise or arrangement has been made

binding by the court on that Insured Buyer and all that Insured Buyer ’s

creditors; or

(d) an Insured Buyer enters into an unofficial compromise or settlement,

in full and final settlement of its debts, with a majority of its creditors

and which the Insured is a party to with the Insurer ’s prior written

approval; or

(e) such circumstances exist which in the opinion of the Insurer is

equivalent to any one of the above.

The Claimable Event Date in respect of any of the above instances will be:

1. In the case of (a) above, the date on which the bankruptcy, Insolvency,

moratoria, or arrangement is deemed to have occurred according

to the relevant law or regulations.

2. In the case of (b) above, the date on which the relevant court order

or decision was made.

3. In the case of (c) above, the date on which the majority of creditors

agreed to the compromise or settlement.

4. In the case of (d) and (e) above, such effective date as the Insurer

may specify.

6.13 Insured

Insured means the partnership, company, corporation, institution, licensee,

or such other entity named in the Schedule or such individual as agreed in

writing by the Insurer and includes all joint Insured as endorsed to this

Policy.

6.14 Insured Buyer

Insured Buyer means any customer of a Supplier which is domiciled in an

Approved Country for whom the Insured has a Permitted Credit Limit during

the Policy Period.

6.15 Insured Debt

Insured Debt means so much of any indebtedness (not including any

collection costs) arising from the Disbursement of a Receivables Purchase

Facility and:

(a) is owing by an Insured Buyer to the Insured; which in the first instance

was owed by the Insured Buyer to the Supplier but which

indebtedness was subsequently purchase by the Insured from the

Supplier in accordance with a Receivables Purchase Agreement: and

(b) does not exceed a valid Permitted Credit Limit; and

(c) is in respect of the invoice value of Shipments by the Supplier to an

Insured Buyer all of which must have occurred during the Policy

Period and pursuant to a contract of sale providing for repayment

of the debt within the terms of payment specified for the Approved

Country of the Insured Buyer in the Approved Countries & Conditions

Table in the Schedule; and

(d) all values of Shipments referred to under (c) above must have been

invoiced by the Supplier within the Maximum Invoicing Period.

6.16 Insured Loss

Insured Loss means the amount of the Insured Debt that is either:

7

(a) admitted to rank against the insolvent estate of the Insured Buyer;

or

(b) in the case of Protracted Default only, so much of the Insured Debt

as is confirmed to the Insurer by evidence that is satisfactory to the

Insurer of a valid debt and which is not in dispute between the Insured

and the Insured Buyer;

each after deducting any Recoveries.

6.17 Insured Percentage

Insured Percentage means the percentage of any Insured Debt for which

this Policy provides an indemnity.

6.18 Insurer

Insurer means the party specified in the Schedule.

6.19 Limit Management Charges

Limit Management Charges means those fees and charges specified in the

Schedule.

6.20 Maximum Country Liability

Maximum Country Liability means the maximum aggregated value of claim

payments available under this Policy for all Claimable Events in the relevant

Approved Country and when this Maximum Country Liability has been

exhausted the Insured is not entitled to submit any further claims for that

Approved Country under this Policy. Any Maximum Country Liability is

part of and is not additional to the Maximum Policy Liability.

6.21 Maximum Extension Period

Maximum Extension Period means the maximum number of days by which

the Insurer has agreed that the Insured may extend the original due date

of an Insured Debt.

6.22 Maximum Invoicing Period

Maximum Invoicing Period means the maximum number of days specified

in the Schedule after the date of the Shipment and within which the Supplier

must invoice the Insured Buyer and within which period the Insured must

have purchased the invoice and Disbursed the funds.

6.23 Maximum Policy Liability

Maximum Policy Liability means the maximum aggregated value of claim

payments available during this Policy Period for all Claimable Events and

when the Maximum Policy Liability has been exhausted the Insured is not

entitled to an indemnity under this Policy.

6.24 Maximum Terms of Payment

Maximum Terms of Payment are as specified in the Approved Countries &

Conditions Table in the Schedule or as varied by Credit Limit Endorsement

and are the maximum terms and type of payment that are allowable by

the Insurer for each Permitted Credit Limit.

6.25 Notifiable Event

Notifiable Event means any of the following events which is deemed to

have occurred when the Insured is aware of an Insured Buyer:

(a) being unable to pay its debts as and when they fall due;

(b) having any cheque which has been rejected returned, stating “refer

to drawer ”;

(c) having a cheque returned stating “refer to drawer, please represent ”,

which, when represented, is rejected again;

(d) having any direct debit dishonoured;

(e) having any non-payment or extension or rescheduling of a debt past

the Maximum Extension Period;

(f) having admitted cash flow difficulties;

(g) having any legal action instigated where solicitors are instructed to

serve a county court judgment, statutory demand or a winding up

petition;

(h) being in or about to be in any form of Insolvency; or

(i) being impacted by any event that would give grounds for the belief

that the Insured Buyer may not perform or comply with its obligations

under a contract of sale with the Insured.

6.26 Other Charges

Other charges means Limit Management Charges, or any other charges

made by the Insurer and payable by the Insured, salvage, Recoveries or

any other monies owing where the Insurer has advised the Insured of a

payment due date.

6.27 Overdue Reporting Limit

Overdue Reporting Limit means the amount specified in the Schedule below

which any non-adverse disputed indebtedness is not required to be notified

to the Insurer under this Policy pursuant to the Notification clause at 4.1 b).

6.28 Permitted Credit Limit

Permitted Credit Limit means either the limit specified by the Insurer in a

Credit Limit Endorsement or where no Credit Limit Endorsement has been

issued is an amount not exceeding the Discretionary Credit Limit (if available)

that has been established by the Insured in accordance with the criteria

outlined in the Schedule.

6.29 Policy

Policy means this document, the Schedule (including any Schedules issued

in substitution), the Proposal and any endorsements attaching to this

document or the Schedule that will be considered part of the legal contract

and any capitalised word or expression in any of these documents will bear

the specific meaning stated in these definitions, pursuant to clause 1.3.

6.30 Policy Currency

Policy Currency means the currency specified in the Schedule.

6.31 Policy Period

Policy Period means the period of insurance specified in the Schedule.

6.32 Political Risks

Political Risks means any:

(a) war, invasion, acts of foreign enemies, hostilities or warlike operations

(whether war be declared or not), civil war, mutiny, revolution,

rebellion, insurrection, uprising, military or usurped power,

expropriation, nationalisation:

(b) requisition, sequestration or confiscation by order of any public

authority or government de jure or de facto or martial law;

(c) act or order of any government, public or local authority restricting

trade transfers;

but not including Terrorism.

6.33 Proposal

Proposal means any information as identified on the Schedule supplied by

or on behalf of the Insured, a completed proposal form, Credit Management

Procedures or questionnaire, renewal form or application form and other

relevant or supplementary information that the Insurer has received.

6.34 Protracted Default

Protracted Default means a Claimable Event and means the failure of an

Insured Buyer to pay an Insured Debt, or any part of it, within the Protracted

Default Period stated in the Schedule and the Claimable Event Date in

respect of Protracted Default will be the date of the expiry of the Protracted

Default Period.

6.35 Protracted Default Period

The Protracted Default Period means the period specified in the Schedule

and which commences on the original due date for payment of an Insured

Debt under the relevant contract of sale or, if that original due date is

postponed, such postponed due date. The Protracted Default Period cannot

commence or continue to run while an Insolvency of the Insured Buyer

exists or while the Insured Buyer:

(a) is entitled or obliged to refuse payment of an Insured Debt under

any applicable law or regulation or is obliged to refuse payment by

a person exercising powers of government; or

(b) claims that it is entitled to withhold payment of any part of an Insured

Debt and the Insurer is satisfied that a dispute exists between the

Insured and the Insured Buyer which has not been resolved by the

parties to the relevant contract or by arbitration, or by legal

proceedings.

6.36 Public Buyer

Public Buyer means an entity which conforms to at least one of the following

criteria:

(a) a government or a ministry, department or agency thereof

(hereinafter referred to as Government);

(b) a regional or local authority or a department or agency thereof

(hereinafter referred to as Local Authority);

(c) a nationalised undertaking (including a public corporation) or a state

trading organisation or an entity which the Government or Local

Authority directly controls provided always that the Government or

Local Authority has clear explicit and constitutionally sanctioned

financial responsibility and a fundamental commitment to the

continuing existence of such undertaking corporation, organisation

or entity.

6.37 Recoveries

Recoveries means the value of all goods recovered (whether under retention

of title or otherwise), all monies (including dividends or distributions out of

an insolvent estate), securities, indemnities, guarantees, rights of action,

escrow monies, counterclaim, set-off or other advantage received or held

by the Insured or the Supplier or available for the purpose of reducing the

amount of any indebtedness of an Insured Buyer to the Insured (whether

in respect of the payment for goods or otherwise) unpaid at the earliest

Notifiable Event and which remains unremedied, excluding any Specified

Security Proceeds.

6.38 Receivables Purchase Agreement

Is the written agreement entered into between the Insured and the Supplier

(a specimen of which has been supplied to the Insurer), containing the terms

and conditions subject to which the Insured will provide the Supplier with

Receivables Purchase Facilities by means of which the Insured may purchase

without recourse from the Supplier the trade receivables owed by Insured

Buyers to the Supplier. Such agreement must not be materially altered

without the Insurer ’s prior written approval and the Insurer undertakes that

such approval will not be unreasonably withheld.

6.39 Receivables Purchase Facility

Is a facility provided by the Insured to the Supplier pursuant to a Receivables

Purchase Agreement.

6.40 Schedule

Schedule means the document titled Schedule that includes the name and

address of the Insured, the premium and other variables to this Policy and

any endorsements and which is incorporated into this Policy and accepted

by the Insured. Schedules may be re-issued from time to time where each

successor overrides the earlier document.

6.41 Shipped and Shipment

Shipped and Shipment means:

(a) in respect of goods:

(i) if an Insured Buyer is located in the same country as the

Supplier, the time (which must be within the Policy Period) at

which the goods physically pass from the Supplier into the

exclusive physical control of the Insured Buyer or the Insured

Buyer ’s agent; or

(ii) if an Insured Buyer is not located in the same country as the

Supplier, the time (which must be within the Policy Period) at

which the goods pass to the first independent carrier in the

process of being carried to the place where the Insured Buyer

or its agent is required to accept them

(b) in respect of services, the time (which must be within the Policy

Period) when the service has been rendered to the Insured Buyer

provided that the Supplier has invoiced the Insured Buyer within the

Maximum Invoicing Period after the work has been completed or

services have been rendered.

Notwithstanding subparagraph 6.41 (a) (ii) above, goods will not have been

Shipped in circumstances where it is both legally and practically possible

for the Supplier, using reasonable means, to stop carriage of the goods

before they leave the country of the Supplier or the country from which

they are being exported.

6.42 Specified Security Proceeds

Specified Security Proceeds in relation to an Insured Buyer consist of monies

or the monetary value of any items of tangible or intangible assets that the

Insured recovers or realises from any security, security interest(s),

guarantee(s) or indemnity(ies) and which are expressed to be the subject

of a special condition of cover under a Credit Limit Endorsement without

which cover would not have be made available by the Insurer but Specified

Security Proceeds excludes the proceeds of any security or security interest,

guarantee or indemnity not so stipulated as a special condition of cover

but which the Insured has instead obtained on its own accord or initiative.

6.43 Supplier

Is an entity which sells goods and/or provides services to Insured Buyers

in accordance with a Receivables Purchase Agreement and is named in

the Policy.

6.44 Terrorism

Terrorism means an act, including but not limited to the use of force or

violence and/or threat thereof, of any person or group(s) of persons, whether

acting alone or on behalf of or in connection with any organisation(s) or

government(s), committed for political or religious or similar purposes

including the intention to influence any government and/or to put the public,

or any section of the public, in fear.