Coverage
Comprehensive Non-Payment Insurance (NPI) for Banks and Financial Institutions is an insurance product that covers the failure, refusal or inability of your obligor to pay contractually due amounts. This is a derivative form of a more commonly known insurance “Trade Credit Insurance”, that is applicable to Banks and Loan facility organisations only.
Not only this product helps protecting against the financial consequences of default by a counterparty such as a borrower, guarantor, or another party to any debt instrument (including loans, bonds, derivatives and project finance, for example) but also it can protect companies against non-payment of invoices by covering receivables due within a defined period of time.
NPI remains relatively unknown in Asia until now for multiple reasons. However there are compelling reasons for banks to now explore this further. Some benefits of NPI:
- Valuable distribution tool for clearing underwritten positions or managing back-book assets
- Manage exposures across countries, sectors & obligors
- Provides increased lending capacity while complying with internal credit limits
- Reduce risk weighted assets relieving pressure on regulatory capital & enhancing returns
- Improves the predictability of revenue streams from the loan portfolio
- Support distribution or hold strategies
- Balance sheet protection– extremely effective risk management tool
Examples of Insurable Transactions
- Term Loan Facilities
- Revolving Credit Facilities
- Trade & Commodity Finance
- Project Finance/Infrastructure
- Pre Export Finance Facilities
- Asset Backed Finance
- Supply Chain Finance
- Derivative Counterparty Credit Risk
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