Documentary Credit Insurance Policy (DCIP)
Key features :
Non-payment risk coverage on Irrevocable Letters of Credit (ILC) issued by Foreign Banks
Single or Multiple Banks
Beneficial usage :
DCIP is extensively used to insure:
1. Confirmation of sight Irrevocable Letter of
2. Discounting of acceptable drafts under
Increase your L/C confirmation business
Protect your Balance Sheet against non-payment of Letters of Credit
Provide Capital Relief as per Based II & III
Enhance your competitiveness
DCIP is available to commercial banks or financial institutions to protect them against the risk of nonpayment of an Irrevocable Letter of Credit (LC) issued by the importer's bank.
DCIP provides (1) Country Capacity and (2) LC Issuing Bank Capacity limits for the bank and enables it to leverage its capacity thereby avoiding referring customers to other banks or miss opportunities to take on new ILC business.
Insurance coverage is available upto 90% of losses arising as a result of non-payment of an Import Letter of Credit on due date due to COUNTRY and COMMERCIAL RISKS.
Premium is normally calculated based on following underwriting factors :
1. Country Risk Grading of L/C Issuing Bank
2. Risk Grading of L/C Issuing Bank
3. Credit / Usance Tenor
4. Credit Limit requirement
5. Terms & conditions of Letter of Credit
6. Underlying trade transaction specifics
7. Available underwriting capacity & benchmark pricing
8. Past experience with the L/C Issuing Bank
Premium payment is generally levied upfront at policy inception, however, there could be policy structures offering an installment premium payment facility spread out over the policy period.
Country Risks & Commercial Risks Insured :
Insolvency of the LC Issuing Bank
Failure or refusal of the LC Issuing Bank to provide reimbursement on due date
Currency transfer restrictions imposed by the government of the LC issuing bank's country
Expropriation, confiscation of or intervention in the business of the issuing bank by a government authority
War or civil disturbance in the territory of the issuing bank's country.