The insurance also covers the exporter’s payment claim under the letter of credit, against the financial institution opening the letter of credit and acquired through legally valid assignment, if the financial institution confirming the letter of credit has silently confirmed the letter of credit in the exporter’s favour. SERV sets limits for the foreign financial institutions that most frequently open letters of credit. Therefore, SERV can usually make a suitable insurance commitment within 24 hours.
SERV waives coverage intervention rights vis-à-vis the confirming financial institution due to increased risks during the term of the letter of credit.
Object of cover
Letter of credit confirmation insurance covers the following claims arising from a letter of credit contract:
- fulfilment of the principal claims arising from the letter of credit transaction via-à-vis the financial institution opening the letter of credit
- ancillary financing costs (including the SERV premium)
- interest receivable until the due date
- default interest during the waiting period
- prepayment penalty (“breakage costs”, costs incurred on the early repayment of a loan)
Claims for damages, contract penalties, compound interest and currency losses are excluded from the insurance.
Period of insurance
The insurance begins on the confirmation of the letter of credit on behalf of the financial institution opening the letter of credit or when silent confirmation is given in favour of the exporter. It ends with the settlement of the insured claim.