Non-honouring of a Letter of Credit

Comprehensive non-payment insurance protects against the financial default of the issuing bank under the Letter of Credit.

Policy tenors can in general achieve up to five years depending upon amongst other things the country of risk and the creditworthiness of the counterparty. However, in certain circumstances policy terms can be obtained for transactions of seven to ten years.

In all cases, the Insured must retain part of the risk of non-payment on its books without any further hedging or additional insurance arrangements. This minimum self-retention would typically be 10% of any exposure, though it can be higher or lower.