I Benefits of MSI Credit Insurance

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1 Credit Insurance of Mitsui Sumitomo Insurance I Benefits of MSI Credit Insurance Payment condition is usually a critical key for international trade competition. Advance Payment or Letters of Credit (L/C) was the main payment condition in early stage. In 1990s, D/P or D/A became common and partial sellers applied Open Account (O/A) to developing countries for more business opportunities. No matter which payment condition you take, delayed payment or non-payment is likely to present. MSI cooperates with global famous credit insurance company to provide credit insurance and credit management to sellers for domestic and worldwide trading. The benefits of MSI credit insurance are as follows: 1. To Support Credit Management To build up control system and lower bad debts 2. To Minimize Financial Risk Hedges against political risk, commercial risk and natural perils 3. Improves Cash Flow By claims payment, and debt collection 4. Enhance Sales By providing favorable or competitive trading terms II Structure of Credit Insurance of MSI Policy Business Contract Buyer Customer (Insured) Buyer Payment of Claim Non-payment Buyer Assessment of credit limit of buyers 1

2 III Introduction of Credit Insurance of MSI 1. Insurance period: One year 2. Prospective Insured: Manufacturer, Trader 3. Insured Contract: Including domestic/export goods or services. 4. Premium (currency-us$): Premium is deposited and adjusted according to declared turnover. Market Rate Addition may be charged for certain countries. 5. Credit Limit Charge (currency-us$): To be charged for each buyer on yearly basis. 6. Commencement of Cover: Cover commences when the goods are dispatched or, in the case of services, when invoice for services performed is submitted to the buyer. 7. Losses Covered: Commercial Risk 1 Insolvency 2 Default Political Risk 3 Government Moratorium 4 Transfer Delay 5 Discharge of Debt 6 War 7 Natural disaster 8 Contract frustration 9 Public Buyer Default 8. Exclusions: 1 Failure to fulfill terms of contract 2 Radioactive Contamination 3 Failure to obtain Import and Export Licenses 4 Third Countries 5 Five Great Powers (PRC, France, UK, Russian Federation and USA) 6 Interest / Penalties / Damages / Costs / Exchange loss 7 Other Insurance 2

3 8 Non-acceptance of good 9 State or government 9. Credit Limit: You must have a Credit Limit for each buyer. In the event of a claim, we will not be liable to pay more than the Covered Percentage of the Credit Limit. We shall not be liable for any loss where you have not obtained a Credit Limit prior to the date of ascertainment of loss. We may at any time and for any reason by written notice to you to withdraw or reduce Credit Limit in respect of any contract, buyer or country. 10. Covered Percentage: 90% for Commercial Risk 95% for Political Risk 11. Insurer s Maximum Liability: The maximum amount, which we shall be liable to pay in respect of all contracts taken together for which our liability commences during the Policy Period shall be the amount of the Insurer s Maximum Liability shown in Schedule for that period, notwithstanding that such amount may be less than the Covered Percentage of any individual Credit Limit or aggregate of Credit Limits. 12. Deductibles: Deductibles will be shown in Schedule. 13. Date of Ascertainment of Loss: The amount of your loss shall be ascertained on the date of ascertainment of loss which, unless provided otherwise in Schedule 2, shall be as follows. Insured must have credit limit before the date of ascertainment. 1 Insolvency the date of the court order or decision; the date of appointment or event; or the day on which we have informed you that we have formed such an opinion. Details as per policy wording Article 9C a. 2 Default 6 months after original due date. 3 Transfer / Discharge of debt 4 months after completion of formalities or deposits made, or if later, 4 month after due date of payment. 4 Other causes of loss 4 months after the occurrence of the cause of loss. 14. Credit Beyond Due Date: You may, if the need arises, allow credit to run for a period beyond the due date of payment specified in the contract with the buyer, or agree in writing to an extension of due date, provided that the period or extension you allow or agree is not longer than the Maximum Extension Period 3

4 (MEP) specified in Schedule 1. If payment of any amount is overdue from a buyer at the expiry of the Maximum Extension Period, we shall not be liable for any loss you may sustain in relation to goods dispatched or in the case of services, to invoices submitted, to that buyer after that date, unless we agree otherwise in writing. 15. Immediate Notification: You must notify us immediately of the occurrence of any event likely to cause a loss. Such an event shall include, without limitation: 1 the failure of a buyer to pay any amount still overdue 20 days after the expiry of the Maximum Extension Period; or 2 a buyer requesting an amendment of payment terms which is unfavorable to you or an extension of due date beyond the expiry of the Maximum Extension Period; or 3 a buyer failing to take up the goods or the documents on first presentation where the payment terms are cash against documents or documents against acceptance; or 4 the imminent or actual Insolvency of a buyer; or 5 you are having reason to believe that a buyer is unable or is likely to be unable to perform or comply with the terms of the contract; or 6 the failure of a buyer to honor a bill of exchange or a check; or 7 the institution of any proceedings against a buyer for non-payment of an amount owing. 16. Claim: Claims must be made within 6 months of the expiry of the Maximum Extension Period. We will make such payment no more than 30 days from either the date of receipt of all the information and documents we require or, if later, the date of ascertainment of loss. 17. Policy procedure of Credit Insurance of MSI 4

5 18. Calculation of Loss: We will calculate the amount of your loss as being the amount owing to you from the buyer at the Date of Ascertainment of Loss less any credits due to the account of the buyer and any savings that you make through non-fulfillment of the contract. The amount of our indemnification shall be the covered percentage either of the Insured Loss or of the amount of the Credit Limit for the buyer, whichever is lower. 19. Contributions to your Costs and Expenses: We will contribute towards costs and expenses that you properly and reasonably incur in fulfilling to take all practicable measures to prevent and minimize loss. Our contribution will be proportionate to our liability for your total loss, including any uninsured portion. However, we will not contribute towards your administrative costs and expenses. We will also not contribute to the costs and expenses of collecting any amount owing if you have chosen not to place the collection of the amount as we may propose. 20. Other Important Conditions: 1 If any of the statements contained in the proposal are untrue or incorrect in any respect we shall be entitled to avoid the policy and retain any premium paid. 2 You must inform us in writing within 10 days of any substantial or material change in the information given in the proposal form, particularly in the nature or the scope of your activities or in your legal status. 3 You undertake to allow us to exercise the right of discovery for checking and verifying that you have fulfilled all your obligations under this Policy. 4 All sums whatsoever received, recovered or realised whether by you, by any person acting on your behalf, or by us in relation to a contract after the date of ascertainment of loss shall be Recoveries. All Recoveries shall immediately be remitted to us. Until this remittance is made you receive and hold Recoveries in trust for us. After receipt by us Recoveries will be divided in the proportion in which the loss is borne by each of us. 5 You must retain exclusively for your own account as an uninsured risk any amount which exceeds the amount we are liable to pay you under the policy. 6 Where we have made it a condition of cover that there be a guarantee or surety, we shall not ascertain loss until a final judgment for the amount owing has been obtained against that guarantor or surety in a court in the country specified in such condition. 7 We have the right to apply any amount payable under this policy in or 5

6 towards payment of any amount owing from you to us (paying interest before principal) under this policy. 8 We have the right to terminate the Policy, subject to the statutory procedure, if you become the subject of any bankruptcy or insolvency procedure under the law of your country. You have the right to cancel the Policy at any time, subject to the minimum statutory notice period and procedure in force at the time. 9 You undertake to treat any information provided to you in strict confidence and not to disclose such information to any third party. 6

7 IV Procedure for buying MSI Credit Insurance Application Customer would like to insure Documents Fill in the Proposal form by Customer Proposal form and information of principal buyers Credit checking for buyers by MSI MSI submits quotation to Customer after credit checking Quotation Customer accepts the quotation and then provides Application Form and all buyers information to MSI for issuing policy Application Form and all buyers information Credit checking for all other buyers by MSI. MSI provides Credit Limits for each buyer to Customer MSI issues the Policy of insurance to Customer Policy of insurance related endorsements credit limits of buyers END of Application 7

8 Application for new buyers Customer would like to cover new buyers Documents Fill in the Credit limit application form by Customer and submit to MSI Credit limit application Credit checking for new buyers by MSI and MSI provides Credit Limits of buyers to Customer MSI issues endorsement to cover the new buyers Endorsement, Credit limits of new buyers END of Application for new buyers 8

9 Declaration and premium adjustment Customer declares the sales price according to the Policy Documents Customer fills in the Declaration form and submits to MSI Declaration form MSI calculates premium according to the declaration MSI issues notice of premium adjustment Notice of premium adjustment Additional premium to be paid by Customer or returned premium to be returned by MSI END of Declaration Please refer to English version of Policy for detailed description 9