The Loan Market Association (LMA) has published a new model form of Credit Risk Insurance (CRI) Policy.
According to the association, this was done in conjunction with Lloyd’s Market Association and the International Underwriting Association (IUA). It said that the CRI Policy is drafted for the purposes of insuring single borrower credit risk arising from a loan agreement and with a view to the CRR requirements for unfunded credit protection.
Amelia Slocombe, managing director and head of legal, at the LMA, said: “In view of our general recognition in the market as a provider of template loan documentation, we felt that we were well placed to assist with this project. We believe that this document will be extremely beneficial to new bank entrants in particular, and give well deserved recognition to a product which is fast becoming a very valuable risk mitigation tool for lenders.”
She added: “The creation of this document is further evidence of the LMA’s ongoing commitment to fostering market growth and liquidity throughout EMEA. This being the first time we have produced an insurance policy document, it is a very welcome addition to our existing suite of documents and one which we hope to continue to finesse over time, alongside all the members of our working party who were very much instrumental to this process.”
The LMA said on behalf of all those involved that the CRI product is sophisticated and a template document cannot be used as a substitute for expert advice, which is needed to ensure that it is tailored to suit the particular needs of each client and the nature of the risk to be insured.
It also said that the policies are not intended to be a substitute for, or to override, terms already negotiated between, and agreed by, specific insured lenders and their insurers.
Arabella Ramage, director of legal for Lloyd’s Market Association, said: “Insurers in Lloyd’s and the wider London market have been embracing the expanding opportunity to support banking clients with individual credit insurance coverage. To support our members, the insurers, we brought together experts from across the market to set down a baseline for the coverage we are able to offer. This is especially valuable since blocks of risk are often shared between insurers; it allows everyone to approach such risks from an agreed starting point.”
She added: “We expect the CRI Policy will encourage more insurance capacity (or supply) into the market. That said, the CRI Policy is not a prescribed form which must be used. We have delivered it as a starting point for each policy which, in the strongest tradition of Lloyd’s and the London market, can be customised for each insurance case. These types of products never stand still so we expect it will be adapted and improved and look forward to working with the other associations on an on-going basis refining the product.”
