Glossary
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A:
Acceptance:
Granting of a credit limit request. This means that EH AG accepts cover for the amount requested by the policyholders for business with one of his customers.
to topAdvance assignment clause:
The advance assignment clause signifies the assignment of future receivables. This can be very useful, if e.g. the policyholder's customer sells the goods delivered by the policyholder to a third party before payment and becomes insolvent. With an advance assignment clause the policyholder has a claim against the third party involved.
Advance payment:
The policyholder is charged with the advance premium payment agreed under point 2 of the Schedule at the beginning of each insurance year. Further premium amounts will be charged against this until the advance payment is used up. The policyholder receives an exact list of the premium payments which have been set off against the advance payment.
Annual aggregate:
Of the total of all indemnifications which EH AG has to render for the claims occurred in one insurance year, the insured shall retain for his own account the aggregate first loss stated in the insurance policy, irrespective of other stipulations with regard to the retention (as the uninsured percentage or the franchise deductible). This amount will be deducted from the indemnification.
Application for inclusion of a new insured buyer:
The application which the policyholder has to submit if he wants to include a new customer in his insurance cover.
B:
Balances:
Open accounts
to topBank status report:
Report obtained for example from the supplier´s bank by the supplier about a (potential) customer. The bank obtains its information direct from the customer´s bank or from the General Credit Protection Agency, Schufa, an infopool for banks.
C:
Cession of balances:
Cession of open accounts
to top(Domestic) Commercial Credit Insurance:
Insurance for bad debt losses sustained by the policyholder in respect of receivables arising out of deliveries of goods to or the performance of services for buyers in Germany. This is EH AG's core business.
Composition proceedings:
Extra-judicial proceedings to avest insolvency in which the creditors obtain a part of their claims.
Cover:
Cover is granted for receivables out of delivery of goods and services which occur during the policy period and which turn into bad debt losses in the consequence of the insolvency of an insured customer which has as well occurred during the policy period.
Covered risk:
Term used in credit insurance for a customer of a policyholder if the policyholder's receivables due from the customer are insured.
CP:
Abbreviation for credit period
Credit limit:
The credit limit is the amount of cover granted for receivables due from the policyholder's customer. If a limit of e.g. EUR 100,000 is granted, the policyholder's receivables from this customer are insured up to this limit. The amount of the limit depends on the creditworthiness of the respective customer.
Credit notification:
Euler Hermes's reply to the policyholder's application for inclusion of a new insured buyer. It documents whether and in which amount the policyholder's receivables due from his customer are insured.
Credit period:
Period allowed for payment or the expiry of the payment term fixed by the supplier until which the customer has to pay, e.g. 30, 60, 90, 120 or 180 days. Commercial Credit Insurance (WKV): The date when the policyholder has to inform Euler Hermes AG that his customer has failed to pay.
Credit rating fee:
Costs borne by the insured for credit assessment. Euler Hermes AG Risk Management GmbH examines all customers mentioned by the policyholder. For this service the policyholder pays a credit rating fee which is considerably lower than the actual costs for credit assessment. This fee has to be paid independently of the result of the assessment because the effort required is the same. Therefore it is in the policyholder's interest to inform Euler Hermes AG before the beginning of a new insurance year if a company is no longer among his customers.
Credit report from an agency:
Report obtained from a credit information agency (Bürgel, Creditreform, Schimmelpfeng) by a supplier about a (potential) customer.
Credit underwriting:
Examination of the creditworthiness of companies by Euler Hermes AG so that we can give you early warning of problems.
Creditworthiness:
A customer's ability to pay and payment behaviour.
Current account:
A business relation where deliveries and/or services rendered by the supplier are set off against the payments made by the customer and the balance is calculated and settled.
D:
Declaration of turnover:
Monthly notification of achieved and insured turnover as basis for the premium calculation. The balances can also be the basis for the calculation instead of the turnover.
to topDeterioration of the risk:
Circumstances which weaken the creditworthiness of your customer.
Discretionary limit:
Maximum amount without the obligation to apply to the insurer for a limit. This is the "borderline" between the policyholder's small customers, for which he decides how much credit to grant, and his big customers for which the policyholder sends limit requests to Euler Hermes AG.
Domestic commercial credit insurance:
Insurance for bad debt losses sustained by the policyholder in respect of receivables arising out of deliveries of goods to or the performance of services for buyers in Germany. This is Euler Hermes AG core business.
Duties of the insured:
The insured companies have duties to Euler Hermes AG which are regulated in their policy conditions.
Documentary evidence of loss:
Documents which are required for the examination if the prerequisites of insurance coverage are fulfilled.
E:
Experience loading:
This means that a higher or lower premium is agreed between the Insurer and the Insured for the following year, depending on the loss ratio of the policy during the current year. For all "special policies" a risk-based experience loading is determined.
to topEuler Hermes Forderungsmanagement (EHFM):
A subsidiary of Euler Hermes AG. Responsible for the collection of bad debts and recovery of monies after indemnification. Very useful as a supplement to a credit insurance policy.
to topF:
Factoring:
This means that a higher or lower premium is agreed between the Insurer and the Insured for the following year, depending on the loss ratio of the policy during the current year. For all "special policies" a risk-based experience loading is determined.
to topFailure to comply with the duties of the insured:
A failure to comply with the duties of the insured occurs when an insured company does not fulfil its contractual duties to EH AG. The reporting of notification periods exceeded is a material element in EH AG monitoring of creditworthiness. If the policyholder does not inform EH AG in the event that his client exceeds his credit period, the policyholder jeopardizes the monitoring of creditworthiness and thus has failed to comply with his duties as insured. In case of a claim the insurer may then be released from his duty to indemnify the loss through such a failure to comply with the duties of the insured.
to topFranchise:
Forms:
- uninsured percentage which is deducted from every claim
- threshold: EH AG only indemnifies the claim if the amount exceeds the franchise
- minimum retention
G:
GCI:
General Conditions of Credit Insurance
to topGuaranteed Minimum Premium (Guarantee Premium):
Irrespective of the amount of premium actually paid during the year, a minimum premium amount is agreed on. As a rule the premium actually paid always exceeds the minimum premium.
to topH:
I:
ICISA:
International Credit Insurance & Surety Association The international association of private credit insurers. The list of members is published annually in a Directory.
to topICL:
Abbreviation for Insurance Contract Law
to topIncrease of risk:
Circumstances which weaken the creditworthiness of the policyholder's customer.
to topIndications of creditworthiness:
Notification period exceeded, extensions to credit period, bills of exchange prolonged, high gearing, too high interest charges on capital.
to topInitial credit assessment (of buyer):
Examination of the abiltiy of companies to pay the insurer or companies ating on behalf of the insurer. Hermes carries out repeated and permanent checks; credit assessment thus becomes a constant process of credit monitoring.
to topInsolvency:
Insolvency is proved if
- an extra-judicial liquidation or quota settlement has been achieved with all creditors or if
- a judicial execution undertaken by the insured has not led to the full satisfaction of the claim.
Insolvency code:
Insolvency is given when insolvency proceedings are opened, are dismissed for insufficient assets or comparable cases of insolvency have occurred abroad.
to topInsurance against bad debts:
Guarantee for the receipt of receivables. In the wider sense: credit management with the goal of actually getting the money.
to topInsured event:
An insured event occurs if there is no doubt that a customer is insolvent or if protracted default occurs. (also Insolvency)
to topInsured percentage:
Insured percentage is the part which EH AG indemnifies if required.
to topInvoice:
Rendering of accounts, charging something to someone's account.
to topInvoice date:
The day on which the invoice for the policyholder is set up.
to topJ:
K:
L:
Limit requested:
Amount of cover requested by the insured for receivables due from a customer.
to topLoss:
All cases in which the insured event has occurred or is to be expected.
to topLoss ratio:
The loss ratio is the ratio between claims paid (and claims reserves set up) within one policy period and the premium paid in the same period.
to topM:
Maximum liability:
Maximum indemnification in one insurance year, for example 20 times the annual premium (stipulated under point 7 of the schedule).
to topMaximum period allowed for credit after due date:
Expiry of the duration of credit agreed between EH AG and the policyholder of e.g. 30, 60, 90 or more days. Corresponds principally to the credit period granted to the policyholders' customer. If the customer has not paid after the expiry of the agreed period, or if the policyholder realizes that his customer will exceed the maximum period allowed for credit, the policyholder has to inform EH AG immediately. (also Notification of period exceeded)
to topMinimum premium:
The minimum premium is the guaranteed premium per insurance year. It is required because the installation and handling of a credit insurance contract causes considerable costs (fixed in point 2 of the Schedule). The difference between the actually paid premiums and the minimum premium is only invoiced if the amount of the minimum premium is not achieved.
to topN:
Notification for premium calculation:
The monthly notification of outstandings / turnover must be made to Euler Hermes AG by a fixed date every month, which is stipulated in the Schedule to the policy. Some policies only have a single annual notification date.to topNotification of balances/outstandings:
The policyholder informs EH AG on a monthly basis on his open accounts. EH AG requires this information to calculate the premium.
to topNotification of overdues:
The policyholder has to inform EH AG immediately when a customer's payment is overdue (stipulated in the contract).
to topNotification period exceeded:
When a customer does not pay within the stipulated credit period. If this is the case, Euler Hermes AG is to be informed immediately.
to topNotification period for claims:
Claims are to be reported within a certain period of time which has been fixed.
to topNPE:
Abbreviation for notification period exceeded
to topO:
Obligation:
If Euler Hermes AG insures the policyholder's receivables it takes over the risk and is under an obligation to pay if and when loss occurs.to topObligation to offer all business for cover:
In signing the insurance policy the policyholder has undertaken to insure all receivables due from all his customers (up from a stipulated amount). "Exclusions" stipulated by contract may be made.
to topOECD:
Organization for Economic Co-operation and Development
to topOnline:
With the help of our Online-Service access is provided to the EH AG Info-Pool which includes more than 20 million addresses worldwide, 24 hours a day. Information on the individual companies is constantly updated. Credit decisions can be called directly from the policyholder's PC at any time.
to topOpen factoring:
The debtor is advised that the claim has been ceded to a factoring agency, which is normally the case. The opposite case is "silent factoring" => the debtor is not informed of the cession of the claim. The collection of the claim is thus handled as if no factoring contract had been concluded.
to topOverdues:
Receivables which have not been paid within the credit period paid upon.
to topP:
Partial acceptance of limit:
A partial acceptance is given if EH AG can only insure a part of the sum insured applied for. The policyholder is informed of the partial acceptance by a credit notification.to topPending claims:
Imminent insured loss.
to topPolicyholder:
A policyholder is a supplier who has concluded a credit insurance whose open accounts are totally or partly insured.
to topPolitical risk:
A term covering all types of politically caused risks affecting the economic, administrative and social situation of a country, e.g. war, boycott, embargo or economic blockade, civil war, civil commotion, strikes, lock-out, confiscation, acts of public authorities, moratorium on payments and the transfer and convertibility risk.
to topPremium:
Euler Hermes calculates the premium from the lists of monthly outstandings or the turnover figures provided by the policyholder. These premiums are payable immediately. They are debited from the policyholders's account provided that he have given a direct debit mandate.
to topPremium rate:
In principle the turnover-based premium or fixed premium is to be agreed with the policyholder (GCI '99). When calculating the premium, the sector and the structure of the circle of customers is to be taken into consideration. Older policies (set up before GCI '99) mainly contain premiums based on (monthly) outstandings. Exception: premium based on (monthly) outstandings.
to topPremium refund:
This clause of the policy contains provisions regulating the refund of a certain percentage of the premium paid if a year has been free of claims (no claims rebate) or the loss ratio remained below a certain stipulated level. This is always subject to the agreed minimum premium, which remains the bottom line whatever the premium refund calculated may be.
to topPre-shipment risk:
Suppliers can already lose a lot of money in their dealings with customers before they have delivered goods or charged for them. Example: Production of packaging material with the customer´s logo. Order value: EUR 200,000. The Customer becomes unable to pay before delivery. Goods are unsaleable to other customers. The loss: EUR 130,000 manufacturing costs. This risk is generally insurable with Euler Hermes AG.
to topProlongation of a bill of exchange:
Extension of the maturity agreed upon on the drawing of the bill.
to topProof of debt:
Proof of the occurrence of a loss
to topProtracted default:
Protracted default occurs after a certain maturity of claim.
to topProvisional acceptance of a limit application:
Euler Hermes AG promises the policyholder for the present to insure the policyholder's receivables due from a certain customer up to a certain amount.
to topProvision for claims outstanding:
A loss reserve is built up as soon as a loss becomes definite and the claim of the policyholder is known. The amount of the insured remaining claim is fixed under consideration of the individual case.
to topQ:
Questionnaire (proposal form) CRQ:
This is the form which is to be filled out by a prospective customer, either in written or electronic form, giving details of his business and company. It is the basis for the Insurer making a quotation and suggesting a particular set of policy conditions. to topR:
Rating:
In international finance markets rating provides a standardized code for the assessment and classification of the creditworthiness of an internatinal debtor. Rating may be country-based or issuer-based. Categories of rating:- A => excellent creditworthiness of debtor
- B => good creditworthiness of debtor
- C => mediocre creditworthiness of debtor
- D => doubtful creditworthiness of debtor
Receivables guaranteed by bills of exchange:
Receivables for which the customer issues a bill of exchange to the supplier. These claims are open accounts until the bill of the exchange has been honoured.
to topReduction:
Reduction of the credit limit on receivables due from a customer if he either no longer needs the existing sum or if the customer’s creditworthiness deteriorates.
to topReduction of a limit:
Stipulation of a lower sum insured, due to a worsening of the economic situation of your customer.
to topReference number:
The reference number is the Euler Hermes AG number given to the customer on the inclusion in the contract.
to topRefusal of a credit limit:
The rejection of insurance cover for receivables due from one of the policyholder's customers. Euler Hermes AG only declares a refusal if after careful research it has found the policyholder's customer to be insufficiently creditworthy or reliable.
to topReinsurance:
Insurance taken out by the insurer himself for the risks he has assumed for his policyholders. The ceding insurer (primary insurer) passes on a portion of the risk to another insurer (reinsurer). Reinsurance can be provided either for direct insurance (in which case it is termed reinsurance) or for reinsurance (so-called retrocession of the risk).
to topRetention of title:
Transfer of ownership with the effect that the goods supplied remain the property of the supplier until the customer has fully paid for them. A distinction is made between simple, extended and prolonged retention of title.
to topReverse factoring:
Reverse factoring is a reversed procedure of factoring in which a finance company is as well set up by the buyer/purchaser of goods. The finance company pays the supplier by taking advantage of cash discounts.The finance company is refinanced via a factoring company. The financing costs are between 30-50% of the cash discount received through this construction. The remaining proceeds are shared between the finance company and the factoring company.
to topRisk type:
There are different kinds of risk: e.g. central regulation with adoption of del credere, pure adoption of del credere, own business, financing through bills of exchange of the involved companies.
to top
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