Working with Banks Credit Insurance Solutions
April 2017
Summary
1. Introduction of Coface Group
2. Coface in Asia Pacific Region
3. Solutions for the Banks
4. Annexure - What is Trade Credit Insurance?
1
Introduction of Coface Group
Coface at a glance
Credit insurance specialist & leader
A global leader for safer trade
A credit insurance specialist
• ~€ 475bn of capacity 2 available for B2B credit
• € 1,411m revenues in 2016
• 50,000 policies underwriten in 100 countries
• Of which 89% credit insurance
• Risk coverage in over 200 countries
• Of which 11% complementary services
A solid financial structure and
resilient profitability
• € 1,767 m1 in capital in 2015
• AA- by Fitch / A2 by Moody’s, standalone IFS
Broad geographical footprint
• 4,200 employees with 70 nationalities represented
• Direct presence in 67 countries
• Largest footprint vs. top global competitors
• 83.1% net combined ratio in 2014
1 Reported
total equity (IFRS)
receivables (theoretical maximum exposure under the
group’s insurance policies) at end-2014
2 Insured
A longstanding experienced player
• In business since 1946
• Strong market awareness of Coface as the historic brand
• Renowned macro- & micro-economic expertise
/
4
Shareholder structure
as of 31st December 2016
Natixis is a corporate and investment arm
of “Groupe BPCE”, the second-largest
banking group in France.
1 (1)
Including 344 010 shares held in treasury under the
Share buyback program, i.e. 0.22% of the capital (of which
152,059 shares from the Liquidity Agreement (0.10%) and
191,951 shares from Own Shares Transactions (0.12%))
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5
Global solutions,
local services
Coface is present directly, or through its partners,
in 98 countries, providing support for customers
in more than 200 countries.
The Group uses its own international network,
which is complemented by the “Coface Partner”
network.
Availability of the Coface ˜Group credit-insurance offer worldwide
Direct: Coface has a portfolio of licenses
which allow it to directly issue credit insurance contracts.
Freedom of Services:
Coface issue contracts from another European country
where it has a license thanks to the UE principle
of free movement of services
˜˜Offshore: Coface occasionnaly issues contracts from abroad,
and according to the conditions of the country concerned.
˜˜CofacePartner : Coface may use an insurer
that has a license in the country concerned,
which issues the contract and retrocedes
all or part of the Coface Group's risks, according
to the principle of "fronting".
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6
2
Coface in Asia Pacific Region
Coface in Asia Pacific
Dedicated to long-term partnerships, trust and consistency
121M€
 First international credit insurance group to
enter Asia Pacific
 Leading insurer in Asia Pacific with
experience and in-depth knowledge of the
local business environment
Turnover (2015)
~400
employees
 Experienced underwriting and claims teams
with clear high level of delegations
supported by solid credit analysts and
claims adjusters
 89% customer satisfaction based
customer survey report by 3rd party
13
markets of
presence
14
on
 Regional in-house Economist providing indepth sector, insolvency and economic
analysis
markets of
services
~2,000
policies
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8
Long experience in Asia Pacific
1995:
Coface
Japan
 Coface
Singapore
1996:
Coface
Hong Kong
2004:
Coface
Australia
2000:
2001:
 Coface
Coface China
South Korea Coface India
Coface Malaysia
Coface Taiwan
Coface Thailand
2011:
Coface
Asia
Pacific
Region
2009:
Coface
Vietnam
2013:
2015:
Coface Coface
Indonesia Philippines
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99
Coface‘s Presence in Asia Pacific Region
India ( Mumbai, Bangalore and
New Delhi)
China (Shanghai, Beijing)
South Korea (Seoul)



Coface India Credit
Management Services Pvt.
Ltd
Thailand (Bangkok)

Coface Services (Thailand)
Co., Ltd.
Coface (Shanghai) Information
Services Co. Ltd.
Hong Kong (Regional Office) –
direct license
Japan ( Tokyo, Osaka) – direct
license


Hong Kong Branch
Malaysia (Kuala Lumpur)
Singapore - direct license


Coface Services (M) Sdn
Bhd
Singapore Branch
Vietnam (Ho Chi Minh City)
Indonesia (Jakarta)


Coface Services Vietnam Co
Ltd
Coface Services Korea Co.,
Ltd.
Coface Indonesia
Representative Office
Japan Branch
Taiwan (Taipei) - direct license

Taiwan Branch
Australia/NZ (Sydney /
Melbourne) - direct license

Australia Branch
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10
Coface Insurance Partners in Asia Pacific Region
India
South Korea

ICICI LOMBARD GENERAL
INSURANCE COMPANY LIMITED

PING AN P&C INSURANCE COMPANY
OF CHINA, LTD

SEOUL GUARANTEE INSURANCE
COMPANY (SGIC)

IFFCO TOKIO GENERAL INSURANCE
COMPANY LIMITED

CHINA TAIPING INSURANCE


BHARTI AXA GENERAL INSURANCE
COMPANY LIMITED

KOREA TRADE INSURANCE
CORPORATION (KSURE)
SOMPO JAPAN INSURANCE (CHINA)
CO., LTD.

FUBON INSURANCE (CHINA)

LIG INSURANCE

UNIVERSAL SOMPO GENERAL
INSURANCE COMPANY LIMITED
Singapore

TENET SOMPO INSURANCE PTE. LTD.

EQ INSURANCE
Hong Kong



SOMPO JAPAN NIPPONKOA
INSURANCE INC.
 FUBON INSURANCE CO., LTD.
MUANG THAI INSURANCE PUBLIC
COMPANY LIMITED

AXA AFFIN GENERAL INSURANCE
BHD

AXA INSURANCE PCL

BERJAYA SOMPO INSURANCE BHD

MULTI-PURPOSE INSURANS BHD
THE SIAM COMMERCIAL SAMAGGI
INSURANCE PUBLIC COMPANY
LIMITED
AIOI NISSAY DOWA INSURANCE CO.,
LTD.
CHINA PING AN INSURANCE (HONG
KONG) CO., LTD.



Taiwan
Malaysia
SOMPO JAPAN INSURANCE
(THAILAND) CO., LTD.
Japan
SOMPO JAPAN NIPPONKOA
INSURANCE (HONG KONG) CO., LTD.
Thailand

11
China
 SHIN KONG INSURANCE
 SOUTH CHINA INSURANCE
Indonesia

PT ASURANSI ADIRA DINAMIKA

ASURANSI CENTRAL ASIA
Vietnam

BAO MINH INSURANCE CORP.

UNITED INSURANCE COMPANY OF
VIETNAM

PVI INSURANCE
Philippines

PGA SOMPO JAPAN INC
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Strong local risk underwriting and claims services
S. Korea ●
China ● ● ● ●
Japan ● ● ●
Taiwan ● ● ●
India ● ● ●
Hong Kong ● ● ● ●
Thailand ● ●
●Risk Underwriting
● Claims
●Enhanced
Information Centre
Singapore ● ● ●
Malaysia
Vietnam
Indonesia ●
Australia ● ● ● ●
● Debt Collection
Centre
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12
3
Solutions for Banks
/ Factors
Partnership
Why Banks work with Coface
Global risk underwriting, infrastructure and knowledge
Insurance
Capital relief
A booster for
the bank’s
business
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14
How Trade Credit Insurance is adding value?
For Safer Trade
With its worldwide risk underwriting, infrastructure and
knowledge, Coface provides the bank the tool to leverage its
business potential
Prevention, risk
assessment and risk
monitoring
Coface provides the bank with insurance in case anything
unexpected happens
Insurance
Coface is putting its
cash at risk
Under circumstances the bank will benefit from capital relief
under Basel 3 based on our strong and stable financial
ratings
Capital relief
Basel 3 regulation
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15
Benefits of Credit Insurance to the Bank
What are the benefits for the bank?
1. Increased revenues:
•
enhanced ability to finance account receivables (domestic and export)
2. Increased profitability:
•
reduction of customer default risk
•
lower cost of capital (collateral provided by Coface rated AA-)
•
overview on the quality of customer’s receivable book
3. Customer retention:
•
anchor the customer relationship over the long term
•
Services like buyer assessment & Debt collection
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Banks – Two Approaches
1. Banks as Partner/
Referral Scheme
2. Risk Transfer Products
Client is the Insured
Bank is the insured
 Credit Insurance Policy
(with or without loss payee
to Bank)
 Factoring, Distributor
Financing, Buyer’s credit,
Structured Trade Finance,
Single Risk,…
Banking Products offered in all countries either by Coface directly or
through our Fronting Partners
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1. Whole turnover trade
credit insurance
(Bank is loss-payee)
Credit Insurance: Loss Payee Structure
Trade Credit Insurance
Coface endorses Bank as Loss Payee
5. Buyer defaults past due
date. Bank notifies Coface
6. Coface indemnifies bank
1. Invoice Discounting/
Bills Discounting
With/ Without recourse
purchase agreement
4. Payment to Bank on
due date
Bank
Supplier
3. Disbursement of funds
against assigned invoices
Buyer
2. Sale of goods and/or
services
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Loss Payee - Different Types
BANKS
Financing Products
Simple Loss Payee
Extended Loss Payee
(without recourse)
Post shipment working capital
financing, receivable financing,
Purchase of invoice without
Bills Discounting, invoice
discounting, Export Financing recourse to the Seller (Factoring)
Financing Process
Trade loans with
invoices/receivables as
'security‘ (no purchase of
receivables)
The bank’s risk exposure is
always on Client (Seller)
Invoice is assigned / transferred to
the Bank, asset owned by the Bank
BUT with option to sell back to
supplier only in event of dispute
only
Co-insurance Clauses
No
Yes
Bank's Obligations / Rights
Very low
High
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2a. Without recourse
Factoring/Receivables purchase
program
(Bank is the Insured)
Without Recourse Factoring
5. Buyer defaults past due
date. Bank notifies Coface
Trade Credit Insurance
1. Without recourse
factoring agreement
(Disclosed / Undisclosed)
6. Coface indemnifies bank
Bank
Supplier
3. Disbursement of funds
against assigned invoices
4. Payment to Bank on
due date
Buyer
2. Sale of goods and/or
services
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2b. Distributor Financing
Insurance
(Bank is the Insured)
Distributor / Dealer Financing
(1)
(2)
Supplier
The Dealer sends purchase order to their Seller
The Seller delivers goods and invoices the Dealer.
a.Dealer checks the quantity and quality of the
delivered goods.
c. Dealer checks correctness of the invoice
b. Dealer sends his validation to the bank
(2) Delivery/
(1) Purchase
Order
(3) Disbursement (after validation
of invoice)
Shipment
Credit Buyer
Agreement
PORTFOLIO OF DEALERS
(3)
(4) Repayment of Credit
Dealer presents invoices & related documents to the Bank. The money is
disbursed by the Bank directly to the Seller
Bank
(5)
Indemnification
(4)Dealer pays to the Bank on the due date, as set into Dealer’s CreditAgreement
(5)
If Dealer fails to repay (protracted default or insolvency), Coface will indemnify the
Bank according to the provisions of the credit insurance policy.
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25
2c. Structured Credit Insurance
Political Risk Insurance
(Bank is the Insured)
Structured Trade Credit Insurance: what is covered?
1) Trade Finance / Commodity Finance - Credit Risk:
•
Supplier or Supplier’s bank insures the credit risk of the buyer
•
Cover non-payment and insolvency risk
•
Can also cover pre-shipment risk (breach of contract)
2) Project Finance - Credit Risk:
•
SPV loan repayment, usually based on offtaker’s quality
3) Performance Risk
•
For advance payment / pre-payment contracts
•
Buyer or Buyer’s bank insures the risk that the Supplier does not deliver and
cannot refund the advance to buyer
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Political Risk Insurance (1/2)
Confiscation
Seizure of some or all of a company’s assets by a government.
Expropriation
Situation of being deprived of facilities on decision by a government
in the interest of the public good.
Nationalisation
Expropriation pronounced by a legislative body to remove owners or
companies with transfer of their management authority to bodies
representing the government and assignment of their assets to the
State.
Deprivation
Prevents the owner from the use of its assets by host government.
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Political Risk Insurance (2/2)
Inconvertibility – Non Transfer
• Inability of the Insured to convert local currency into policy currency and to transfer such
monies outside of the country
• Covers payment of invoices, dividend or capital repatriation and / or cross-border loan
repayments
Political Violence
• Covers damage to physical assets (ie commodity inventories or industrial assets)
• Caused by war, civil war, general strikes, riots, etc…
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Annexure
What is Trade Credit Insurance?
Basics of Trade Credit Insurance
Prevention
Recovery
Insurance
Trade Credit Insurance
• Prevention
– Of the inability of customers to meet their financial
obligation
• Recovery
– Recovery of unpaid invoices/debts
• Insurance
– Indemnification of up to 90% of invoices
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Credit Insurance Flow
6. Upon investigation, Insurer
honors claims
1. Sign Trade Credit
Insurance policy
• Assessment on buyers’
credit worthiness
• Grant buyer credit limit
• Set credit period
COFACE
5. Buyer defaults on invoice
past due date. Supplier
notifies Insurer
4. Acceptance of goods
delivered and Payment to
Supplier on due date
Supplier/
Policy holder
3. Delivery of goods and
invoices
Buyer
2. Sales contract (open
account terms)
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Trade Credit insurance: Management of trade risk
Risks linked to you either :
The Counterparty (Commercial)
or Environment it operates in (Political)
covered
covered
• Insolvency
• Protracted Default
not covered
• Non Acceptance Of Goods
• Trade Dispute
• Government Moratorium
• Non Transfer of Risks
• Cancellation of Import License
• Occurrence of War, Revolution
not covered
• Devaluation or Depreciation
of Currencies
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Credit Insurance & Risk Management –
comprehensive solution
Risk monitoring
Collection and mass processing of
information
Analysis and rating of
credit risk:
‘Debtor
Risk Assessment’
according to a single scale
Exchanges
with the
customer
Risk underwriting i.e.
decision of risk
exposure
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Main Exclusions

Genuine trade disputes

Sale to subsidiary & associates

Sales made against irrevocable confirmed letters of credit

Sales against advance payments

Sales to individuals or for non-commercial use

Pre-shipment risk

Consequential losses & Interest on late payment

Loss in excess of Credit Limits

Nuclear Risk

Loss due to Foreign currency fluctuations

A war between two or more of the following countries: France, China, Russia, the U.K and the
U.S.A.
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34
Product Features
 Insured Percentage
Up to 90%
 Premium Rate
On turnover / on Outstanding / on Credit Limits
 Minimum Premium
80-100% of Estimated Premium
 Maximum Liability
Multiplier of Premium Paid / Fixed Amount
 Maximum Credit Period
180 days (including credit extensions) 210
 Time Limit for Notification of
Overdue Accounts
days
 Maximum Invoicing Period
10 days, starting from the delivery date
 Maximum Transfer Period
30 days, starting from the Invoice date
 Claims Waiting Period
Insolvency : 30 days / Non-Payment : 5 months
 Declaration
Reporting period : Monthly / Installment : Monthly
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Pricing parameters
Pricing based on 5 factors:
 Insurable Turnover
 Industry
(some industries being riskier than others)
 Countries
 Credit
 Past
(higher the insurable t/o, lower the rate)
(latest country risk profile on http://www.coface.com )
Period
trade losses
(Seller/ Buyer)
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Key Obligations of policy holder
 Be realistic in your prediction of estimated insurable turnover
 Be realistic in your limit requests on your debtors
 Pay the premium on time
 Apply for credit limits for buyers on time (once policy is issued)
 Provide turnover declarations on time
 Report adverse information or a CLAIM on time
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What are the benefits of trade credit insurance?
Financial risk
management
tool
• Framework to improve
credit control
effectiveness
• Independent and objective
risk assessment of
customers
• Constant monitoring of
customers’
creditworthiness
• Efficient debt recovery
services
Secure Business
Growth
• Expand sales securely in
new markets
• Provide detailed
information on potential
new buyers
• Offer more competitive
payment terms to secure
sales
• Possible higher level of
funding at a better rate,
using Trade Receivables
Protect
Business
Transactions
• Protect the balance sheet
against bad debts (up to
90% recovery)
• Trade Receivables
account on average for
35% of corporate total
assets (25% of companies
collapse because of bad
debts) and without Trade
Credit Insurance,
receivables are not
covered
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Credit Insurance Timeline
5.Notification of
overdue account
1. Delivery
2. Invoice
Maximum
Invoicing
Period
30
10 days
3.Initial due
date
initial credit period:
60
90 days
maximum credit period set in the policy
120
180 days
All shipments covered
6. Claim
summary
4.Extended
due date
extension:
60
90 days
time limit
limitfor
for
time
Notification of overdue
account:
30 days from
extended
due date
7. Indemnification
claim
waiting period:
5 months from the
Notification of
Overdue Account
Payment
Process
30 days
Stop new shipments
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Claims – Assessment of cover
WHAT ARE THE STEPS INVOLVED?
1. To check that the Notification of overdue is in compliance with the terms of the policy.
2. To ensure that insured submit all relevant Documents.
3. To liaise with Insured if further information or clarification required.
4. Has the intervention fee been paid?
MAJOR REASONS FOR REJECTION OF CLAIM
 Breach of MCP/Late Notification
 Dispute as the reason for non-payment
 No prior approval from Coface with regards to the repayment plan
 Outstanding fee and premium payment
 Insufficient supporting documents
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