Also termed as ​'Payables Financing' or 'Vendor Financing' or 'Supply Chain Financing' or 'Reverse Factoring', this Trade Credit Insurance Policy is availed by the Bank to insure payment default risk of its Obligor to whom bank proposes to extend trade finance facility to pay Supplier(s) for buying products or services. 

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The insurance arrangement is structured in a very bespoke fashion to reflect the specifics of the proposed trade finance facility. Each proposed Vendor / Supplier and product(s) are pre-approved by the Credit Insurer and reflected in the policy contract document. The specifics of the trade transaction, transaction flow, trade documentation, collaterals and financing agreement is all declared by the Bank, perused by the Insurer and incorporated in the policy contract for sake of abundant clarity and precision. 

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For Islamic Trade Finance Banks, we also structure Trade Credit Takaful to cater to Commodity Murabaha and Tawarruq (Reverse Murabaha) lending structures in a Sharia-compliant fashion. 

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Insurance coverage ranges upto maximum 90% but Bank's generally tend to supplement their risk capacity by availing Credit Insurance wrapper with indemnity limits between 50% - 75% treating Credit Insurance more like Risk Participation or quasi-syndication arrangements to sweeten the deal structure. 

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Capital Relief​ :

The policy wordings can also be structured and worded in a fashion to provide the Bank with a Capital Relief complying with Basel II and III requirements.