Sullivan Works With Willis Towers Watson and ITFA Towards a Basel III-Compliant Trade Credit Insurance Policy

Press Release
October 12, 2021

London, UK - Sullivan is pleased to announce it has worked with Willis Towers Watson, the International Trade and Forfaiting Association (ITFA) and Clifford Chance, among numerous other banks, insurers and brokerage firms, to develop a Basel III trade credit insurance policy form. The form is the result of three years of work and negotiations and was released last week.

Trade credit insurance, which covers the risk of non-payment by borrowers and obligors in trade finance products and loans, has been shaped by legal change, the Basel Accords and regulatory capital relief. This new form is designed to cover receivables policies, but is also a platform for devising compliant policies for other situations and products.

"This is the first step of many to further standardise a Basel III trade credit policy," comments Sean Edwards, ITFA Chairman and CEO. "Consistency, predictability and a reliable form is paramount to regulatory bodies further recognising trade credit insurance as a viable risk transfer mechanism for capital substitution. We need all banks, insurance companies, law firms and brokers moving in the same direction if we are to grow the overall industry. We’re hopeful that this project will spark a further push in this direction."

The joint memorandum, issued by Sullivan together with Clifford Chance, provides guidance to the reader which will help streamline final policy negotiations.

Geoffrey Wynne, head of Sullivan’s Trade and Export Finance Group, together with Hannah Fearn, Managing Associate, part of the team working on the project, commented: "we are very pleased to have been involved in this significant project which, ultimately, will help market participants when negotiating trade credit insurance policies. It is a very good starting point for negotiations, but of course will need more work as the market continues to adapt and develop."

"I’m very proud of what this group has accomplished as it will help lead this insurance segment forward as we continue to enhance this policy form," commented Scott Ettien, Executive Vice President at Willis Towers Watson (Basel III Think Tank), who spearheaded the project. "Countless hours can be spent negotiating forms, which often results in parties across the market landing on similar wording, particularly where the bank is seeking capital relief eligibility. To date, banks and insurers have held tight to their own negotiated forms, however, not all insurers will accept a bank’s specifically negotiated Basel policy wording, limiting the capacity levels the bank can acquire with its own form in the market."

"Furthermore," Scott Ettien continues, "the magnitude of many receivables programs necessitates multiple insurers allocating capacity. A consistent form of wording recognised by the industry is highly advantageous in allowing parties to reach an agreed wording more quickly."

About Sullivan
Sullivan & Worcester (Sullivan) is a leading AmLaw 200 law firm with over 200 attorneys in Boston, London, New York, Tel Aviv and Washington, DC. Sullivan’s clients, including Fortune 500 companies and emerging businesses, rely on Sullivan’s strategic vision, comfort with complexity and intense focus on results. As a global law firm, Sullivan’s reach extends beyond the United States. Sullivan has represented clients around the world and has a deep bench for working on a variety of matters and issues affecting clients globally.

Sullivan’s London office is located at Tower 42 in the heart of the City of London. Details are as follows: 25 Old Broad Street, London EC2N 1HQ, Tel: +44 (0)20 7448 1000.

Will Hulbert
+44 (0)1603 431 936

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