Every answer and its explanation appears here once you have finished the path. Each one then links to the matching glossary entry, where the concept is set out in full with its worked example.
1. Receivable of 1,000,000 euros, 90 percent cover, indemnity of 900,000, retained share of 100,000. The liquidator distributes 300,000 euros from which 42,000 of recovery costs are deducted. The clause applies recoveries to reimbursing the insurer up to what it paid. What does the insured receive?
Nothing: costs are deducted before any split and the remaining 258,000 goes entirely to the insurer, the retained share waiting for a second dividend
The computation is set out rather than reasoned: 300,000 less 42,000 leaves 258,000 to split, and the clause allocates all of it to the insurer, which paid 900,000. The two most interesting wrong answers are correct under a DIFFERENT wording: a pro rata split would indeed give 25,800, and priority recovery for the insured would indeed clear the 100,000. Three families of clause exist, the same facts produce three results, and the contract decides. The 30,000 answer forgets the costs, which always come off first. What weighs here is not visible in the figure: on a liquidation that has already distributed thirty percent, the second dividend may never arrive.
Glossary entry · subrogation2. Why can a high percentage of cover be worth less than a lower one?
Because the application clause decides what the insured recovers afterward, and a high percentage with recoveries applied first to the insurer can be worth less than a lower percentage with a pro rata split
The two clauses are read together because only together do they say what the insured will really bear: one decides the indemnity, the other decides the rest, and it is always the first that gets discussed. It is negotiated at placement and never after the loss, when everyone already knows what will come in. The answer charging costs against the percentage puts a real mechanism in the wrong place: costs are indeed taken before the split, but they come off the sums RECOVERED and not off the indemnity. Time makes it all worse, a retained share served last losing value from waiting alone, with no interest to compensate it.
Glossary entry · principe-indemnitaire3. Six months after the indemnity, the debtor transfers 25,000 euros to the exporter's account in settlement of another, uncovered invoice. The exporter keeps it. What should be made of that?
The insurer being subrogated, a sum coming from that debtor is not for the exporter to apply: it is for the insurer, alone in knowing the full state of the file, to say what it applies to, and keeping it without reporting it is a fault that is sanctioned
This is the dangerous point of the file and the good faith exporter does not see it, because it reasons on the invoice the transfer claims to settle. Subrogation removes its free disposal of a receivable it still believes it holds, and the right step is to REPORT rather than to apply. The answer demanding full payment over with no discussion errs in the other direction and deserves careful rejection: the application may perfectly well end up in the exporter's favor, what is forbidden is not receiving but deciding alone. And the rule holds on sums far above 25,000 euros, which is why it is worth setting early.
Glossary entry · subrogation4. What is deducted before the split, and what adds a further stage to the discussion?
Recovery costs, fees, local correspondent, translation, are taken from the sums received before any split; and where several receivables on the same debtor coexist, some covered and some not, applying between receivables comes before applying between parties
This is where the surprises sit: an insured that has not watched for it finds a net recovery far below the gross announced, and the difference comes entirely out of its share when the clause serves the insurer first. The answer having each party bear costs in proportion to its share is equitable and is not what common wordings say. Default interest sometimes follows its own regime, separate from principal, which makes it a real point to check rather than an answer. And the extra stage of multiple receivables is the one discovered mid discussion, because it only arises with debtors one did a lot of business with.
Glossary entry · assurance-credit-export5. Why does time always work against the insured on these files?
Because recoveries arrive late and in fractions, and a retained share served last loses value from waiting alone with no interest to compensate it: on a liquidation distributing three dividends over five years, serving the insurer first can mean seeing nothing before the last one, and therefore in practice never
This is what makes the application clause heavier than it looks, and the mechanism is not legal at all: it is arithmetic and silent, nobody decides it and nobody disputes it. The answer about costs names a real deduction, and it is a level rather than a drift, it happens once per recovery and does not worsen with waiting. The one invoking limitation borrows from another module of this certification a very real risk which strikes both parties alike, whereas the question is about what bears on one of them. What time reaches here is precisely the share the insured did not choose to retain.
Glossary entry · principe-indemnitaire