Solution: Given Advance Payment
Typically used for a single transaction where a buyer seeks protection against the risk of non-repayment of an advance payment made to a supplier under a delivery contract. This coverage ensures that if the supplier fails to deliver as agreed, the buyer’s advance payment is safeguarded.
Main Characteristics:
Subject of Coverage: An advance payment given to a supplier under a delivery contract.
Losses Covered: Inability to recover an advance payment due to non-delivery, where such non-delivery results from a credit event, including insolvency or protracted non-repayment following a pre-agreed waiting period.
Self-Retention: Typically between 5% and 10%.
Why Choose Coverage for a Given Advance Payment?
Risk Transfer: Advance payments convert into unsecured credit exposure once paid. Coverage mitigates the risk of a write-off arising from supplier insolvency or protracted non-repayment.
Financing Advantage: Insured advance payments may be more readily accepted by lenders, improving financing terms and supporting prudent risk disclosure.
Guarantee Alternative: Insurance for a given advance payment is a suitable replacement of a bank guarantee.