ISSUE 59: Credit Insurance News Digest
About this issue's sponsor:
XS Reserve’s idea is very simple; to support a company’s cash flow and improve its access to financing. Greater certainty is achieved by enabling them to build cash reserves through regular, monthly instalments into their own designated bank account over a term of up to three years, but, importantly with the full term value available on day one. We achieve this by arranging insurance cover up to the value of the proposed reserve. This insurance will respond to a claim on the reserve from day one, even though the insured’s bank account balance may be less than the claim. By cash funding a significant part of the risk exposure, this skin-in-the-game approach can help companies reduce their insurance spend and hence their operating costs whilst also helping treasurers reduce their WACC. As the reserve isn’t a sunk cost unless and until there is a claim, the process improves cash flow management and forecasting. This has considerable benefits for many companies in uncertain and volatile economic times.
This brand new product better supports Treasury needs for consistent and predictable cash allocation, whilst the reserve, and any Excess of Loss cover sitting above it, can respond to an unexpected event. The cover protects against credit defaults on the sales ledger and overcomes the difficulty of negotiating standby lines of liquidity from banks who are already under severe pressure with capital constraints imposed by Basel regulation. It can also help companies – both financial and non-financial – release precious cash collateral they may be required to post, restricting cash flow.
The full value of the reserve can be assigned to a third party, such as a trade financier, and provide a valuable form of cash collateral. XS Reserve can therefore be seen as an economic alternative to a Standby Letter of Credit at a time when banks are increasingly reluctant to provide such LoCs.
The XS Reserve product is now being purchased by major corporations as part of their receivable financing collateral, and is expected to become an integral part of the receivables finance and credit insurance landscape in the future.
For further information:
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