Trade Finance: Credit & Political Risk Insurance

Course Overview This course teaches you how to use credit and political risks insurances in international trade and with the discounting of trade receivables, explaining the relationship between the two. It examines the points of view of suppliers, buyers and financiers. The programme opens with analysis of the insurances, particularly as contracts, and examines their documentation and varying types, their interpretation and administration. It then studies the mechanisms and instruments of trade finance – open account, bills of exchange, medium- and long-term credit(including through Export Credit Agencies) and documentary credits. This leads into the discounting of trade receivables and, within that, the role of credit and political risks insurances. As about 75% of world trade is estimated to be conducted on open account terms, there is detailed consideration of factoring and invoice discounting. Case studies and illustrative examples are provided at all stages. You will learn how to: Discount trade receivables Employ trade receivables as security Anticipate and counter common trade finance problems Administer a sales ledger Implement credit control and collection procedures Raise, discount and achieve payment of bills of exchange Use and manage credit and political risks insurance policies Methodology As with all Euromoney Training courses, this programme makes use of case-studies and exercises to ensure that you leave the course ready to apply your new knowledge Who should attend This course aims to accommodate multiple levels of expertise and experience for delegates from varying backgrounds. Trade finance bankers Forfaiters Corporate relationship managers Risk and credit managers Credit analysts from financial institutions Financial controllers Import and export managers from corporates Lawyers involved in trade finance Audit and compliance managers
Day 1 Introduction to Insurances Credit and political risk insurances: what are they? Uses, benefits, advantages The Far East – insurances, trade and trade finance Major insurers – similarities and differences Export Credit Agencies – longer-term insurance and finance Brokers: who are they and what do they do? What is insured? Credit risks Political risks Pre-credit risks What is not insured? Contractual performance risk Client risk Foreign exchange risk A Policy as a Contract of Insurance Definition of a Contract of Insurance ‘Proceed as if a prudent uninsured’ Uberrimae fidei Policy Documentation and Policy Types Policy paperwork: Proposal Form, Schedule, Terms and Conditions, Credit Management Addendum, Endorsements Policy types Ground-up Excess of Loss Single risks Top-up Captive insurers Essential concepts and terminology Attaching to a policy as a financier Joint insured and loss payee- advantages and disadvantages of each Policy interpretation Understanding terminology and wordin in individual clauses Understanding how individual clauses, terms and concepts relate to and interact one with another Emphasis upon case studies with comparisons of definitions and clauses between different policies Policy administration How to monitor a policy Importance of credit management Declarations and overdue reporting Prompt reporting of insured buyers potentially being unable to pay Timely payment of premium Client audit Bad Debts Causes of loss Date of ascertainment of loss Waiting period Presentation of claims Claims inspection Salvage and recoveries Realisation of security Subrogation Day 2 Principal Payment Mechanisms of International Trade The Far East - trading on open account terms and documentary credits Differences between discounting of cross-border receivables and trade financed through documentary credits Advantages and disadvantages of each Discounting of Open Account Trade Receivables What are Factoring and Invoice Discounting? Their presence in the Far East Market structure and statistics Invoice discounting Market structure and statistics Similarities and differences between the two The importance of assignment of invoices Who runs the sales ledger? Who handles the invoices? Who collects debtor payments? Obligations of the Financier Obligations of the Client Different types of Factoring and Discounting Domestic and international Features and terminology Treatment of invoices by the Financier The financing agreement Recourse and non-recourse Features and terminology Treatment of invoices by the Financier The financing agreement Importance of credit insurance for non-recourse business International receivables discounting predominantly non-recours Credit insurance Its role in trade debt discounting Role of credit management The Factoring Endorsement to a policy Conditions of cover on individual limits Importance of the Financier’s deemed knowledge of the Client’s business Maintaining contact when Financier and Client are located in different countries Credit insurance limits as debtor funding limits Credit cover negated by trade disputes Guarantee payments and credit insurance claims Factoring and Invoice Discounting Facility Structures International Factoring and Discounting: available facilities Contractual relationship between Financier and Client Contractual relationship between Client as supplier and his customers, the debtors Contractual relationship between Financiers Operational practices and procedures International Factoring organisations International Receivables Discounting - Variations Importance of jurisdiction Financier and Client in the same countr With export debts With domestic and export debts Financier and Client in different countries With debtors in the Financier’s country With debtors in a different country to the Financier’s Necessity of clear understanding of the legal positions of parties to the financing arrangements under the appropriate prevailing jurisdiction Operational practices and procedures from raising of an invoice to collection of debtor payment The Financier’s role The Client’s role Discounting International Receivables – Further Developments Alternative schemes Day 3 Discounting of Bills of Exchange - ‘Forfaiting’ The Far East – developments in the market Definition of a bill of exchange Different types of bill: inland and foreign The specific features of inland and foreign bills What to do at payment date How they differ from invoices How they avoid trade disputes How they are discounted Role of credit insurance Importance of credit management Medium- and Long-Term Credits Export Credit Agencies: who they are and what they do Private market insurers and ECA’s – similarities and differences Supplier credits Nature and definition Mechanisms Insurance and finance Documentation Payment instruments Buyer credits Nature and definition Mechanisms Insurance and finance Documentation Payment instrument Documentary Credits Role of credit insurance Insurance against default by an issuing bank Legal Cases Actual court cases involving credit insurance policies