FCIA's Letters of Credit Insurance policy protects banks against nonpayment of irrevocable letters of credit (ILC) issued by banks overseas for cross-border transactions.
Eligible credit terms are generally up to 360 days, however, longer terms can be considered for manufactured goods. Coverage is available on issuing banks worldwide.
Most policies are used to cover confirmation of sight ILCs or discounting of acceptance drafts under usance ILCs. Coverage may be issued for one or multiple letters of credit, single or revolving transactions, and some or all ILCs issued by one or multiple banks. The Letters of Credit policy can include coverage for refinancing of payments under sight letters of credit.
- Non-cancelable limits
- Non-honoring of ILC coverage for political and commercial risks
- Can cover single or multiple issuing banks in one country
- Minimum premium of $20,000
Why Purchase Letters of Credit Insurance
Banks most often purchase our Letters of Credit policy to insure transactions that might otherwise exceed existing internal country or issuing bank capacity limitations. A policy can also be used to mitigate risks in foreign markets where the bank has limited experience. This enables a bank to leverage its capacity and avoid referring customers to other banks or missing opportunities to take on new ILC business. Please read the FCIA Letters of Credit Policy brochure for more details.