Between the exporter and its insurer there is almost always a broker, and its presence changes the nature of everyone's obligations in a way both parties gauge badly. The broker is not a neutral intermediary passing papers along: it is mandated by the insured, owes it advice, and part of what the insured believes it told its insurer was told only to the broker. On export risks, where disclosure bears on countries, buyers and payment terms that move constantly, that relay is where information is lost, and where liabilities get shared after the fact.
The first point to establish is the mandate, because it governs everything else. A broker mandated by the insured acts for it: what it knows is deemed known by the insured, and what the insured tells it reaches the insurer only if it passes it on. Information communicated to the broker and never passed on therefore does not protect the insured against its insurer, it opens a claim by the insured against its broker, which is not the same thing at all: the loss remains uncovered, and fault and prejudice must then be proved in a second set of proceedings. That asymmetry alone justifies writing important disclosures rather than saying them.
The broker's duty to advise has a content going beyond finding the best price, and it is judged on what it gathered before placing. It must enquire into real needs, which means knowing the countries sold into, the structure of the buyers, the terms granted and the financing arrangements; it must explain what the contract does not cover, which matters more than explaining what it does; and it must flag manifest mismatches between the activity described and the cover proposed. A broker placing a whole-turnover policy on an exporter most of whose turnover runs through documentary credits, without saying what that changes, has not done its job even if the contract is a good one.
Placement fault takes a few recognizable forms in practice. Placing cover that leaves the main part of the activity outside the guarantee. Failing to flag a decisive exclusion, a sanctions exclusion for instance, on an exporter selling into countries under regimes. Failing to warn about a condition the insured manifestly cannot meet, a thirty-day notification period in an organization with no circuit for it. Or letting cover lapse for want of following an expiry it was managing. These situations resemble each other in one respect: the fault is not having negotiated badly, it is having left the insured ignorant of something it needed to know.
One must also see what is not a broker's fault, because blaming it there wastes time on a real file. A refusal of capacity on a saturated country, a rate the market imposes, an exclusion every carrier applies, are not failings: they are the market's bounds, and the broker explaining them is doing its job. Likewise, the insured keeps its own obligations, disclosing accurately, meeting deadlines, observing its limits, and it does not transfer them by entrusting its programme to a professional. The sharing turns on what each knew and had to say.
One point about remuneration deserves attention because it explains certain advice. The broker is most often paid a commission assessed on the premium, deducted by the insurer, which creates tension between its interest and its principal's when it comes to reducing a programme. This is not an accusation, it is a structure: it explains why the remuneration question is put openly, why some large programmes are paid on a fee basis, and why advice to reduce a perimeter carries more weight coming from someone it would not pay.
The practical discipline comes to three inexpensive habits. Write important disclosures, keeping the record of what was passed on and when, because the burden of proving the relay falls on the insured. Ask, at each placement, for the list of what the contract does not cover, and keep it signed: that is the document that will later decide who had to know what. And have the programme reviewed by someone not paid on the premium once it becomes significant, not out of distrust but because two readings of a thirty-page contract are worth more than one.
A medical equipment exporter, 22 million euros of turnover, entrusts its programme to a broker. During the underwriting questionnaire, in February, the finance director tells the broker orally that 30 percent of sales go to three countries under sectoral restrictions, and asks whether that poses a problem. The broker answers that the standard policy is suitable. The contract placed contains a clause disapplying the cover to the extent that payment would expose the insurer to a sanction. In October, an unpaid receivable of 1.7 million arises in one of those countries; the insurer invokes the clause, and it is right. The signed questionnaire mentions none of those three countries. Where do the liabilities lie?
Two questions the file mixes must first be separated, because the order decides what can be hoped for. The first is cover, and it is settled: the sanctions clause is clear, the insurer invokes it rightly, and the loss is not covered. Arguing that with it leads nowhere and consumes the useful time. The second is the relay, and that is where the file is decided. The broker is mandated by the insured: what was said to it orally in February never reached the insurer, since the signed questionnaire does not mention those three countries, and that untransmitted information does not protect the exporter against its insurer. It does, however, open a claim against the broker, on two distinct grounds that must be named separately: failure to pass on decisive information, and above all failure to advise, since a precise question was put to it about those countries and it answered that the standard policy was suitable, without flagging the exclusion that would empty the cover on thirty percent of the activity. The second ground is the stronger and the less dependent on proving the relay. It remains that the burden of proof, in both cases, falls on the exporter: it must establish what was said in February, and it holds only an oral exchange. The lesson costs 1.7 million and fits in one line: disclosures touching the perimeter are written down, and the list of what the contract does not cover is requested signed at placement.
- 01The broker is mandated by the insured: information told to it and never passed on does not protect the insured against its insurer.
- 02It opens a claim against the broker, which is not the same thing: the loss stays uncovered and a second set of proceedings is needed.
- 03The duty to advise is judged on what was gathered before placing, and above all on what was said about what the contract does NOT cover.
- 04A refusal of capacity, a market rate or a general exclusion are not placement faults: they are the market's bounds.
- 05Commission assessed on the premium creates tension when a programme is to be reduced: this is not an accusation, it is a structure.