Credit Insurance For Banks & Financial Institutions

Credit Insurance For Banks & Financial Institutions

    – Insurance of Letters of Credit / Buyer Credit Insurance
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  • Insolvency of the obligor.
  • Failure or refusal of the obligor to pay on due date.
  • Currency inconvertibility and transfer restrictions imposed by the obligor’s country.
  • Expropriation, confiscation or adverse government intervention in the business of the obligor.
  • War or civil disturbance in the obligor’s country.
  • Protects balance sheet against losses due to commercial and non-commercial (i.e. political) risks.
  • Improves capital adequacy via capital relief.
  • Optimizes Balance Sheet by de-risking a portion of the portfolio.
  • Better reflection in ICAAP and CRM techniques.
  • Provides additional headroom capacity.
  • Reduces portfolio cost using the credit rating of a highly rated multilateral institution.
  • Minimizes non-performing assets.
  • Enhances business volume.
  • Helps in structuring Shariah compliant financing facilities.
  • Banks / Financial Institutions domiciled in ICIEC Member Countries.
  • Banks / Financial Institutions domiciled in ICIEC Non-member Countries, owned not less than 50% by the IsDB or by Member Country.
  • Banks / Financial Institutions offering Shari’ah compliant products.
  • Banks that finance strategic exports to member countries.
  • Up to 7 years

How It Works ?

Documentary Credit Insurance Policy (DCIP)
  1. Importer arranges issuance of LC.
  2. The issuing bank issues an LC to the exporter’s banks.
  3. The exporter’s bank applies to ICIEC to insure the LC. ICIEC insures the LC up to a certain percentage (e.g. 90%). The Insured is required to keep the uninsured amount on its own account.
  4. In case of non-payment by issuing bank, the exporter’s bank submits claim and ICIEC pays compensation (90% of the loss).
  5. ICIEC recovers from the issuing bank and pays 10% back to the exporter’s bank.
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Bank Master Policy (BMP)
  1. The exporter’s bank concludes an insurance contract with ICIEC up to a certain insured percentage (e.g. 90%) and pays the premium.
  2. The bank provides Islamic financing to the exporter with the purchase contract as security.
  3. In case the buyer fails to pay, the bank files a claim with ICIEC, which indemnifies the bank for up to 90% of the loss.
  4. ICIEC recovers from the buyer and returns the 10% uninsured share to the bank.
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