Identifying and dealing with risks before they become a problem
Swiss export companies rely on SERV for protection against economic and political risks when conducting international business. So, what happens when a loss is incurred? What are the risks – not only for our policyholders but also for SERV itself? Claudia Oberle, Head of Claims and Recovery, and Meike Liatowitsch, Head of Legal, provide a glimpse into the nature of their everyday work.
“Our aim is not just to provide protection against risks, but also to identify them at an early stage,” says Claudia Oberle. Risks can arise, for example, from local, regional or geopolitical unrest or from health crises like the COVID-19 pandemic. Such events can complicate, or even prevent, the completion of payment processes originating outside Switzerland. These risks can cause liquidity problems for foreign debtors and ultimately lead to insolvency.
That is why effective pre-loss management is crucial in order to prevent losses as early as possible.
Pre-loss management at SERV
As soon as circumstances occur that increase the risk of a loss – known as risk-aggravating factors – policyholders must inform SERV without delay. This is vital so that SERV can adopt loss-prevention or mitigation measures as soon as possible. These measures include issuing reminders and initiating debt collection measures or communicating with the debtor.
Meike Liatowitsch is the Head of Legal at SERV. She explains that risk-aggravating factors become more pressing when the debtor is more than one month in arrears, or when there is other evidence of a general deterioration in the debtor’s financial situation or that of a jointly liable third party (a guarantor). Other aggravating factors could arise with regard to insured political risks or transfer risks, i.e. when payment transactions are impacted.
If the debtor experiences problems making payment, it is very important for the policyholder to initiate contact with the debtor; SERV can assist with this if necessary. Specifically, these problems involve delayed payment or other issues in relation to the insured transaction. The policyholder has to play an active role in ascertaining the precise nature of the problem. The only way to achieve a solution is by working together.
When the situation becomes serious – claims processing at SERV
What happens if the debtor defaults on payments despite all the preemptive measures? In that case, SERV checks – as any other insurer would – the facts of the case and the indemnification request against the corresponding evidence. It also ascertains whether the legal requirements for an indemnity have been met.
According to Meike Liatowitsch and Claudia Oberle, the key conditions for indemnification are that the foreign buyer must be subject to a legally valid, due and payable credit receivable; and that no defences or objections, i.e. deficiencies, are being asserted by the debtor. The claim must also be enforceable. If the premium has been paid in full and all other conditions for indemnification have been met, SERV will issue a claim assessment report, obtain approval from the relevant authorised party and pay the indemnity promptly.
When recovering funds becomes a challenge – the recovery process at SERV
After the indemnity comes the recovery phase. “SERV can play the long game, but we cannot and nor do we want to give up on the money, as SERV has to fulfil its obligation of economic viability,” says Head of Recovery Claudia Oberle. “We work with the insured company – the exporter or bank – to reclaim the money from the foreign debtor.”
There is a full range of possible recovery measures besides the standard reminder and debt collection measures. They include, for example, repayment agreements with the debtor to pay back the outstanding credit receivables over an extended period. “We seek extrajudicial solutions instead of protracted legal proceedings whenever possible. Involving international recovery agencies can also be helpful on occasion,” adds Claudia Oberle.
Risk accumulation
The situation becomes particularly challenging when there are legal risks, and if the foreign debtor is not willing to pay and stops communicating. “Different legal systems, unclear contract formulations or local legislation can complicate the repayment process. When that happens, experience, instinct and our international network help us recover funds successfully,” stresses legal expert Meike Liatowitsch.
Political risks also enter the equation, for example if sanctions, currency controls or political instability complicate or even prevent payments. These risks are covered with SERV, but they can of course make recovery more complicated or even impossible.
“There is always the danger that a claim for compensation will not be met and the claim has to be written off at the end of the recovery process, “ explains Meike Liatowitsch. That is usually what happens in the event of insolvency proceedings or bankruptcies, or when other circumstances render payment impossible.
“Writing off a claim is the last resort,” emphasises Claudia Oberle. “SERV has staying power and we don't give up for as long as we see any prospect of getting the money back.”
“We have only been talking about risks, but our greatest strength lies in cooperation – not just within SERV, but especially with our policyholders and experts and in exchanges with other export risk insurers, which can assist with the recovery,” conclude Claudia Oberle and Meike Liatowitsch.
Recognise risks. Assume responsibility. For Swiss exports.
Where it encounters liquidity problems, unwillingness to pay or political risks in the target markets, SERV employs experts in law and claim and loss management. They work together for as long as it takes to identify complex risks and find solutions for claims processing and recourse management.
