The competitive origination of commodities often requires traders to prepay suppliers or enter into tolling or processing agreements.
As with buyer non-payment, supplier non-delivery can be covered in the private Political Risk and Credit Insurance market.
Supplier non-delivery insurance indemnifies against the failure by a supplier to honor its delivery obligations under a purchase contract (where the goods have been prepaid by the Insured) or a tolling or processing agreement.
Insurers will assess and price the risk according to various parameters including the country of risk, the tenor, the business sector, the supplier’s market reputation and financial strength and the quality of the underlying transaction, etc. An important factor will be the insured’s prior experience with the supplier.
Premium is usually charged on the insured exposure until the due date (e.g. X% per annum on exposure). Note, however, that the premium can be charged as a flat rate (small risks) or on policy limit.
Supplier non-delivery policies may be subscribed by one or several insurers, depending on the transaction size and insurers’ capacities.
Market capacities for government suppliers (CF) remain more significant, yet capacities for private suppliers (CR) have grown consistently over the past decade, with a series of insurers able to write lines of USD 50,000,000 or more on individual transactions (see “CF” and “CR” columns in the Markets section).