AT A GLANCE
How the protection works
A bank non-payment insurance presentation should identify the insured loan or financial obligation, borrower and guarantor, amount and tenor, repayment source, security, covenants, country exposure, transaction purpose, existing risk mitigants and the circumstances that could prevent principal or interest being paid.
Non-payment insurance can transfer defined borrower non-payment risk on a single-name or portfolio basis. The contract is tailored to the underlying obligation and may respond to commercial or political causes of non-payment depending on the wording.
FINANCIAL & PROFESSIONAL
What may be covered
- Non-payment of principal and/or interest due under the insured loan or financial obligation, subject to the policy terms.
- Commercial or political causes of non-payment where those perils are expressly included in the contract.
- Single-name or portfolio exposures where the underlying obligations and insured interests are clearly defined.
The policy is tailored to the underlying obligation; attachment, waiting periods, recoveries, security and claim requirements depend on the contract.
BOUNDARIES
Common exclusions and limitations
- Amounts, borrowers, obligations or causes of loss outside the insured definitions.
- Known defaults, undisclosed material deterioration, sanctions restrictions or excluded political events.
- Failure to comply with policy conditions concerning notification, recoveries, security, amendments or preservation of rights.
This is not a complete list. The insured obligation, exclusions, conditions and policy schedule determine the protection.
CLAIMS IN PRACTICE
How a claim might arise
01. A borrower fails to make scheduled principal or interest payments following an insured commercial default.
02. A political event or currency-transfer restriction prevents repayment under an insured cross-border obligation.
03. A lender follows the policy’s notification and recovery requirements after an insured payment default and seeks indemnification according to the contract.
These examples are illustrative only and do not confirm that a particular claim would be covered.
CHOOSING COVER
Questions worth resolving
- What is the exact insured obligation, borrower exposure, amount, tenor and repayment source?
- What security, guarantees, covenants and other credit-risk mitigants support the transaction?
- Which jurisdictions, political events, concentration risks or borrower developments could affect repayment?
For wider proposal preparation, see the DIBNI Commercial Insurance Proposal Guide.
CONNECTED RISKS
Related protection to consider
- Property and business interruption where physical damage could stop operations.
- Public, employers’ or product liability for injury and property-damage exposures.
- Cyber, professional indemnity or management liability where data, advice or governance creates additional risk.
- Motor, marine, travel or other specialist protection where the activity requires it.
QUESTIONS
Frequently asked questions
What information does a bank usually need to present for non-payment insurance?
Useful information commonly includes the underlying loan or obligation, borrower and guarantor, amount and tenor, repayment source, security, covenants, country exposure, transaction purpose and existing credit-risk mitigants.
How does non-payment insurance differ from a credit default swap?
Non-payment insurance is an insurance contract tailored to the underlying obligation and insured peril. Its terms, conditions and claim requirements are set by the policy and should be assessed against the specific transaction.
Why do security and repayment source matter?
They help explain how the obligation is expected to be repaid and what alternative recovery routes may exist if the borrower cannot perform as expected.