An export receivable circulates, and the insurance covering it does not always circulate with it. From that mismatch come files notified by the wrong person, indemnified to the wrong holder, or paralyzed because the party holding the evidence no longer has an interest in acting. An exporter that discounts its receivable with a bank, factors it, or pledges it to a lender, changes the holder of the right without necessarily changing the policy. Three questions then arise and they have three distinct answers: who must notify the loss, who receives the indemnity, and who afterwards pursues recourse against the debtor. Giving the same answer to all three is the commonest error.
The techniques must first be distinguished, because they do not transfer the same thing. An assignment carries the right itself to the assignee, who becomes the buyer's creditor. A pledge leaves the receivable with the exporter and gives the lender a preferential right over what it yields. Discounting transfers the receivable but often with recourse against the transferor, so that the final loss falls back on the exporter while title sits elsewhere. The characterization decides who is the insured and who is the loss bearer, and those two persons can perfectly well differ: in discounting with recourse, the bank holds title and the exporter is the one who loses.
The policy ordinarily organizes this circulation through a loss payee or assignment clause, and one must know what it actually does. Naming a beneficiary does not make it an insured: it receives payment, it takes over neither the notification duties nor the recovery duties, which remain the exporter's. A fuller assignment can transfer the status of insured to it, and the insurer then raises against the beneficiary the same defences it would raise against the exporter, which surprises many lenders: a non-disclosure at underwriting, a limit overrun or a late notification attributable to the transferor turn against the assignee, which had no part in them and discovers it has bought a receivable carrying a fragile cover.
The point that blocks most files in practice is notification. Policies impose short deadlines for reporting an overdue, and the information circulates in the commercial relationship, that is, at the exporter, which is no longer always the insured. The assignee bank, for its part, sees only an uncredited maturity, often several weeks late, and is unaware of the material establishing the cause of default. A perfectly covered loss can thus be lost on an out-of-time notification made by someone without standing, while the party with standing did not know it had to act. The remedy is not litigation, it is documentary: the assignment agreement must say who notifies, within what period, and what each transmits to the other.
Recovery suffers from the same mismatch, and it is more insidious because it bears on conduct rather than on acts. The insurer requires recovery diligence from the insured before indemnifying. Yet an exporter that has assigned its receivable without recourse no longer has any economic interest in pursuing its customer, and even has a commercial interest in sparing it for future orders. The bank, for its part, has the interest but not the means: it has neither the relationship, nor the local correspondents, nor knowledge of the file. Slack recovery then occurs without either party having decided on it, and the insurer raises it when the time comes to pay.
Subrogation, finally, closes the chain and must be thought through in advance. The insurer that indemnifies is subrogated to the insured's rights against the debtor, but those rights must still exist in the hands of the party it indemnifies. If the receivable has been assigned, the indemnified exporter cannot pass on a right it no longer holds, and the insurer finds itself paying without recourse. That is a dead loss for it, and it is why insurers most often condition their consent to assignment: they are not protecting a theoretical prerogative, they are protecting the only asset left to them after settlement. A structure that overlooks this point meets a refusal of consent at the worst moment, when the financing is already committed.
What is retained is a simple method rule and one check. The rule: any circulation of the receivable is dealt with in the policy before it is dealt with at the bank, and the insurer's consent is sought when the structure is built, not at the first unpaid maturity. The check fits in four names written side by side on a sheet, the one who notifies, the one who recovers, the one who is indemnified and the one who is subrogated. If all four are not covered by a stipulation, a clause is missing, and it is in that gap that the loss will be lost.
An equipment exporter discounts without recourse, with its bank, a 2.8 million euro receivable on a Latin American buyer, covered by a credit insurance policy in its own name. The policy carries a loss payee clause in the bank's favour, and nothing else. The June maturity is not honoured. The exporter, informed as early as July by its local agent that a decree has just restricted external payments in the buyer's sector, notifies nothing: the receivable is no longer its own. The bank observes the missing credit in September and notifies the loss, without mentioning the decree, of which it is unaware. The policy's notification period is thirty days. What happened, and what should have been provided for?
Three errors compounded and none is an accident. The first lies in the clause: naming a loss payee does not transfer the status of insured, so the duty to notify remained with the exporter, which believed in good faith that it had followed the receivable. The September notification was therefore made by a party without standing, and out of time besides, since the starting point was the June maturity. The second lies in the evidence: the decree is the element establishing the political cause of default and it never reached the file, because it circulated at the party that no longer had an interest in acting. The third is structural: discounting without recourse removes any economic interest in recovery from the exporter, while the policy continues to require diligence, and the bank has the interest without the local correspondents. What should have been provided for fits in four stipulations written at the structuring stage and not at the loss: who notifies and within what period, who transmits the causal material to the other, who conducts recovery and with what means, and the insurer's consent to the assignment, without which its subrogation is empty and its refusal predictable.
- 01Assignment, pledge and discounting with recourse do not transfer the same thing: the holder of title and the bearer of the loss can be two persons.
- 02A named loss payee receives payment but takes over neither notification nor recovery, which remain with the exporter.
- 03The insurer raises against the assignee the defences arising with the transferor: the lender inherits a cover weakened by facts it knows nothing of.
- 04Discounting without recourse strips the exporter of any interest in recovery while the policy still requires diligence.
- 05Write side by side who notifies, who recovers, who is indemnified and who is subrogated: a missing name means a missing clause.