Protracted default
A cause of loss in trade credit insurance: the buyer fails to pay without being in insolvency proceedings, and the loss is deemed established when a waiting period set by the policy runs out.
A Nantes exporter has been waiting since the January 15, 2025 due date for a Moroccan importer to pay 400,000 euros. No bankruptcy, no judgment: the buyer answers the chasers, promises a transfer, does not pay. The exporter filed its overdue notification on February 10. Its policy sets a 150-day waiting period from that notification: if nothing is paid by July 10, the loss is established as a protracted default. The insurer does not ask for proof that the buyer is insolvent; it presumes insolvency from the length of the delay. The period varies by policy, often three to six months, sometimes longer, and runs either from the due date or from the notification, which makes a difference of several weeks on the same file. The other way in is legal insolvency. If a court opens insolvency proceedings against the buyer, judicial reorganization or liquidation in France, administration or liquidation in the United Kingdom, the loss is established on the date of the order, without waiting for the period to run out. The insured must still have filed its claim with the court-appointed officer within the statutory period, two months after publication in the BODACC for a creditor based in mainland France, four for one based outside it (article R. 622-24 of the Commercial Code); a debt extinguished for want of filing is not indemnified. Once the loss is established and the debt documented, the indemnity falls due within the policy's settlement period, often thirty days. One caveat that insureds tend to find out late: a debt the buyer disputes over quality or quantity delivered is a disputed debt, and indemnity waits until the insured has obtained a judgment or an acknowledgment of debt.
Textbook case: a 400,000 euro receivable, a 350,000 euro credit limit, a 90% insured percentage, a 150-day waiting period from the February 10, 2025 notification. Nothing is paid: the loss is established on July 10, 2025, and the indemnity of 0.9 x 350,000 = 315,000 euros is paid by August 9 at the latest, thirty days later. The exporter keeps 400,000 - 315,000 = 85,000 euros. Had a Casablanca court opened a judicial liquidation on April 2, with the debt filed in it, the loss would have been established that day, three months earlier, for the same amount.
protracted default, waiting period, presumed insolvency, de facto insolvency
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