The use of private insurers in export insurance and financing provides efficient solutions and helps to reduce financial costs. Solmondo’s reactivity and creativity guarantee efficient cover and excellent service on a daily basis.
Short term non-cancellable credit insurance
Solmondo offers short term non-cancellable credit-insurance solutions for non-payment risk.
At the very time when traditional credit-insurers are disengaging and starting to withdraw or reduce the outstanding amounts of insured portfolios, it is time to think differently. In traditional credit insurance policies, cover is said to be voidable. This means that even when the premium has been paid for 10 years by a costumer, the insurer can withdraw its cover with only a few weeks' notice.
Solmondo offers other credit insurance solutions based on internal credit management:
- multi-year and non-cancellable cover for the most important customers
- so-called "excess" risk-sharing solutions with compensation beyond an amount of loss that the insured company can reasonably bear.
The resulting premium will therefore better reflect the service effectively provided.
Solmondo's solutions are adapted to the company's Credit Management and allow to optimize the cost/security ratio.
The policies offered can take the form of a single-buyer or multi-buyer cover :
- Solmondo proposes limits that cannot be cancelled by the insurer from 12 to 36 months
- The policy covers insolvency but also deficiency and political risk
- The cover can apply only to the strategic risks chosen by the company
- Solmondo negotiates the terms of the policy in order to obtain better conditions than the standard policies as well as optimised financial conditions (premium/limit of compensation ratio)
- Low cost for lasting coverage
If one can rely on effective internal credit management, excess of loss is a very effective solution:
- It protects against an unusual accumulation of unpaid debts
- The policy can be concerted or not, i.e. with or without individual limits approved by the insurer
- Insolvency but also political risk are covered
- Solmondo guarantees limits that cannot be cancelled by the insurer
- Low cost for lasting coverage
Contracts and financing insurance
Contracts insurance covers a “disaster” risk, a long-term process that makes it possible to avoid a serious loss whose impact on the financial situation of the exporter, investor, investment fund or bank, could jeopardize the very survival of the company.
Solmondo drives competition in a market of more than 50 insurers (A or AA) operating alone or in syndication on a single policy.
Solmondo’s commitment to the policy holder is continuous in order to obtain the most efficient tailor-made solution. Solmondo’s unique experience and independence make it possible to activate competition in a highly dynamic market of a large number of insurers.
During the preparation and implementation of the cover, Solmondo deploys its vigilance to optimize the legal and financial conditions of the policy.
Solmondo maintains its attention during the execution of the contract with always in mind the prospect of a possible claim.
- For a new operation, Solmondo attaches crucial importance to the acquisition to getting to know and understanding the transaction and its context, in order to be responsive to the policy holder and to adapt to any change in the contractual conditions.
- Whether the contracts are for public or private buyers, Solmondo offers exporters its experience in analysing contractual clauses, letters of credit and guarantees. Solmondo accompanies the exporter through all stages of negotiation, analyses the terms of the contract and participates in the identification of risks and their assessment.
- Solmondo widely consults with available insurers to identify the insurers most interested in the transaction in order to obtain the best coverage conditions.
- Solmondo’s experience in a large number of countries sheds light on the specificities of contractual practices, helping the exporter to detect possible pitfalls. The contract is the keystone of the operation’s security and the policy must anticipate latent risks.
- Solmondo assists the exporter in estimating the risk to be insured by providing its know-how in assessing the risk curve using a Solmondo model, which enables the identification of the capacities required to cover the risk in syndication.
- Solmondo can syndicate on its policies from among more than 50 insurers of the market, making it possible, for example, to insure a construction site for a power plant: the risks insured by the private market alone can exceed 2 billion euros.
- The terms of the policy drawn up by Solmondo’s brokers are particularly beneficial to the insured on various aspects: the generating events covered, the methods for calculating the premium and any revisions during the execution of the contract.
- Solmondo diligently conducts claims management for satisfactory and prompt compensation.
- Solmondo prioritizes the criteria for decisions on the relevance and object of coverage and considers different frameworks to offer an educated alternative to the exporter, based on the exporter's risk management policy.
Public buyer contract
Solmondo contributes to the negotiation of contracts and the optimisation of risk curves to protect against the risk of contract interruption.
- The events covered in case of impossibility of execution of the contract are: breach of contract, political risk (embargo, license removal, etc.), political violence (terrorism, riot).
- For contracts with public buyers, Solmondo’s experience gives its analyses of contractual terms a valued relevance, which improves the identification of risks, their evaluation and the proposal of mitigations.
- Solmondo evaluates the different payment solutions according to the insurers' evaluation; some public buyers can be accepted for direct payment without a letter of credit. In the case of a letter of credit, Solmondo provides guidance on the different banks that insurers may agree to cover.
- Solmondo advises on covering the risk of contract interruption, which is defined as the exporter’s risk prior to the "constitution of the right to claim” and concerns the manufacture of capital goods and the construction of infrastructures which by their very nature cannot be easily and quickly resold to another buyer.
- Solmondo assists the exporter in estimating the risk to be insured by providing its know-how in assessing the forecast risk curve (expenses incurred in excess of advance payments received), using a Solmondo premium calculation model.
- Solmondo attaches great importance to this stage of the process, which conditions the capacities that need to be mobilised to cover the risk in syndication.
Private buyer contract
Solmondo participates in the evaluation of the buyer's quality and offers different formulas for covering credit risk or financing insurance.
- Solmondo considers different payment schemes for exports with or without a Letter of Credit, and depending on the nature of the goods, offers a supplier credit solution with promissory notes or confirmation of the letter of credit.
- Solmondo analyses the contractual terms and the text of the Letters of Credit to detect risks and propose mitigations.
Securing short and medium term payments
Whatever the payment instruments or the chosen financing structure, Solmondo mobilises and selects insurers to provide cover for simple non-payment or risk-sharing with banks.
Depending on the type of operation: public or private client, recurring or one-off, Solmondo finds appropriate solutions.
- Solmondo studies the various insurance solutions against non-payment in cash: insurance of payments by transfers, confirmation of letters of credit issued by a public or private bank,
- For the insurance of medium-term contract financing, insurers may offer non-certification of documents by the buyer in addition to covering the non-repayment of the credit by the buyer in addition to cover for non-repayment of credit
- The "pre & post" premium calculation method is often very competitive.
- In the current state of banking regulation, medium-term private insurance products are penalized, for the same rating, compared to public insurers, which explains why banks no longer have the choice, for medium-term operations, to use the private sector, even though it is more responsive and more flexible; export operations are therefore slowed down since they have to go through the maze of public procedures.
- For smaller operations that should be covered by public insurance, BPI does not provide solutions adapted to small businesses.
- Public/private collaboration is strongly encouraged by the authorities due to the dynamism of the broker/private insurer ecosystem. All the more so as the Brexit effect has strengthened the Paris market place with the arrival of new medium-term risk underwriting offices.
Call of bonds or call of guarantees cover
Solmondo advises exporters as soon as the bonds or guarantees are issued in order to limit the financial risk on these operations and, where appropriate, to insure it.
For years, Solmondo has been using an innovative and unique wording for the insurance of the calling of bonds that simplifies claim management in the event of an appeal.
Following the call of bonds or guarantees for political matters, insurers will pay compensation:
- for a public buyer any call is political and therefore covered (except for technical litigation),
- for a private buyer if the call is legitimate in case due to a political event,
- acts or decisions of the government of the buyer’s country, of the insured‘s country or of a third country, such as an embargo or an administrative decision to withdraw a license are insured,
- political violence affecting the proper execution of the contract is also a factor in this cover,
- the cover of Capricious Call by a private buyer, which is accepted by insurers in the case of excellent signatures, makes it possible to secure certain project financing structures.
Examples of operations that can be insured by the medium-term market
Sale of telecommunications equipment to the Ministry of Communications of Chile
26 million euros
Execution period of the contract: 36 months
Study and supply of civil engineering structures to improve circulation in Mozambique
96 million euros
Duration: 3 years
Installation of a power plant in Dubai
40 million euros
Duration: 3 years
Sale of medical equipment to the Greek Ministry of Health
45 million euros
Execution period of the contract: 42 months
Truck sales to the Defense Department of Ecuador
18 million euros
Execution period of the contract: 20 months
Construction of a dam with power plant to the national electricity company in Zimbabwe
750 million euros
Execution period of the contract: 64 months