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Credit risk insurance policy model form published

Credit risk insurance policy model form published | Insurance Business UK

Credit risk insurance policy model form published

A working party – members of which include representatives from the Lloyd’s Market Association and the International Underwriting Association (IUA) – has put together a credit risk insurance (CRI) policy model form published by the Loan Market Association (LMA).

“In view of our general recognition in the market as a provider of template loan documentation, we felt that we were well placed to assist with this project,” said LMA managing director and legal head Amelia Slocombe. “We believe that this document will be extremely beneficial to new bank entrants in particular, and give well deserved recognition to a product which is fast becoming a very valuable risk mitigation tool for lenders.”

The LMA described CRI as a “sophisticated” product that required the first-hand experience of the working party members in coming up with a model template that has a recognisable framework and boilerplate. Aside from the insurance associations, the team also spans representatives from law firms, banks, brokers, insurers, and A2Z Risk Services.

“Insurers in Lloyd’s and the wider London market have been embracing the expanding opportunity to support banking clients with individual credit insurance coverage,” noted Lloyd’s Market Association legal director Arabella Ramage.

“To support our members, the insurers, we brought together experts from across the market to set down a baseline for the coverage we are able to offer. This is especially valuable since blocks of risk are often shared between insurers; it allows everyone to approach such risks from an agreed starting point.”

She continued: “We expect the CRI policy will encourage more insurance capacity (or supply) into the market. That said, the CRI policy is not a prescribed form which must be used. We have delivered it as a starting point for each policy which, in the strongest tradition of Lloyd’s and the London market, can be customised for each insurance case.”

Ramage went on to point out that such products “never stand still,” saying her camp looks forward to working with the other trade bodies on an ongoing basis for further refinements.

Meanwhile IUA senior market services executive Joe Shaw commented: “Credit risk insurance is an expanding sector, and many IUA members are keen to further their support for such coverage.

“Establishing a standardised template policy will help the market operate more efficiently, providing a tangible benefit to both clients and insurers.”

This is the first time that the Loan Market Association has produced an insurance policy document.