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Structured Credit

In a volatile and unpredictable economic environment, financial institutions are required to carefully manage their balance sheets and credit exposures. We can help structure and coordinate your credit and political risk strategies and build regulatory compliant global insurance programs.

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Choosing the right risk distribution strategy requires that financial institutions work with a risk advisor that understands their business and the global risk landscape.

Our Lenders Solutions Group is dedicated to providing financial institutions with specialist knowledge on the structuring, syndication, and placement of credit-related insurance solutions using our market-leading products. We are one of the industry’s leading credit and political risk advisors, with access to a global network of experienced and knowledgeable professionals.

Our solutions are designed to comply with the risk and regulatory requirements of each country where you require them. They allow you to free up valuable regulatory capital, mitigate your credit risk exposures, and enhance your risk appetite to support your growth strategies.

The geopolitical and economic landscape for financial institutions has become increasingly uncertain and volatile, as the events that began in 2020 continue to impact businesses in their home markets and those that they serve overseas. Given the increased risks businesses face globally, financial institutions should ensure they have the right credit and political risk strategies in place and confirm their insurance programs are compliant with relevant country regulators.

Marsh’s Lenders Solution Group specialists offer insights and support to help you manage your structured credit decisions for domestic and cross-border transactions, leveraging insurance risk capital to optimize results. We help you — whether a financial institution, trading house, or corporation — choose a suitable policy to cover your risks and help safeguard your business against any disputed claims.

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US$350

billion in coverage placed globally for political risk and structured credit clients

60+

financial institution clients across 30 countries

2,500+

policies annually representing over US$150bn of notional exposure risk transferred

FAQs

Structured credit insurance protects your business from the failure or refusal of the borrower, for any covered reason, to pay an amount (principal and/or interest) due under an insured loan obligation. It is applicable to a wide range of financial obligations, including loans, guarantees, and documentary credits.

Under a non-payment insurance (NPI) policy, the peril that causes the non-payment event can be very broad, from the insolvency of the borrower to a political risk event that prevents repayment of monies owed. It is available on a secured, non-secured, and trade-related or non-trade (working capital) basis, depending on the underlying contract and other elements of the transaction.

Additionally, it can be used to cover risks in short-, medium-, or long-term timeframes, as would be most relevant to a particular client account, and in both emerging and developed markets. It is sometimes referred to as “contract frustration insurance,” for its ability to decrease the stress associated with non-payment of accounts receivable.

Unfunded risk transfer to private market insurers is an established risk distribution strategy for financial institutions. Using non-payment insurance (NPI) contracts, the non-payment risk of their borrowers can be transferred on a single name basis or as a portfolio.

Unlike credit default swaps, an NPI contract is tailored to the underlying loan obligation. Marsh can provide guidance on how your NPI contract should be structured to qualify as an eligible credit risk mitigation technique under Basel III, which underlines the need for efficient capital management.

There are many benefits to using an NPI contract for borrower risk mitigation purposes.

When you work with Marsh, some of the benefits of our NPI contract — where the insurance market serves as a syndication partner to transfer exposures – include:

  • Significant capital relief through risk-weighted asset reduction.
  • Increased risk appetite.
  • Management of risk concentrations.
  • Alternative to sharing with competitors.
  • Competitive pricing.
  • Increased profitability, return on risk, and return on equity.
  • Uncorrelated and non-systemic distribution partners.
  • Undisclosed and silent risk participation partners.
  • Significant capacity and depth of insurance counterparties.

Any lender that relies on payments from domestic or international business partners, whose ability to pay may be affected by factors like political volatility, economic instability, or trade restrictions, should consider structured credit insurance.

Even when these are not significant concerns, structured credit insurance can be leveraged to expand lending relationships with counterparties, thereby avoiding your borrower needing to source additional funding from your competitor institutions.

Our people

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Mark McLeod

US Structured Credit & Political Risk Practice Leader, Credit Specialties Leader.