Glossary of Terms

An individual businessperson or legal person who holds the credit. The insured is jointly and severally liable with the policyholder and the terms and conditions of the contract apply to it. 

What does beneficiary mean? The beneficiary is a personal nominated by the insured and formally authorised by the insurer to collect the indemnity derived from a loss.

This refers to the exchange of goods and services between different countries with open economies through sales, whether using a single currency or different ones according to an exchange rate. Read more about foreign trade 

A public buyer is any entity, of whatever legal form, that represents the state and which cannot either judicially nor administratively be declared insolvent. It may be a debtor or sovereign guarantor if it represents the financial credibility of the State in any of its forms, as well as any other subordinary public entity or body.

A contract is made up of the general conditions, the classification endorsements or other endorsements and their fees in force at any given time.

A trade or commercial contract is a contract for the supply of goods, delivery of facilities or provision of services instrumented in a public, private or other document whose purpose is the sale by the insured in exchange for a credit that is certain and enforceable against the debtor.

A credit in which the amount receivable is certain, of a fixed amount and due that is covered by the contract held by the insured against the debtor and, where appropriate, against the guarantor as a consequence of a sale with deferred payment.

A documentary credit or letter of credit is a payment instrument, subject to international regulations, according to which a bank (the issuing bank), acting on the request and according to the instructions of a customer (importer/sender), must make a payment to a third party (exporter/beneficiary) within a certain period, against delivery of the required documents, as long as the terms and conditions of credit are met. The exporter thus ensures that it will collect payment for the goods it exports, while the importer ensures it will properly receive them.

Read more about Documentary Credit

A debtor is an individual businessperson or legal person who is bound by a contract to repay the credit.

What is a company? A company is made up an individual businessperson or a legal person resident in Spain who signs the contract.

A company in which at least one of the following circumstances obtains (as of 31 December 2019)::

• If it is a limited liability company (which is distinct from an SME which has traded for under three years or, for the purposes of the criteria to be eligible for risk financing aid, an SME, within seven years of its first commercial sale, which meets the conditions to receive risk financing investments after the due diligence checks by the selected financial intermediary), when more than half its subscribed equity capital has disappeared as a result of the accumulated losses; it is what happens when the deduction of the accumulated losses from the reserves (and from all the other elements that are usually considered the company’s own funds) leads to a negative result greater than half of the subscribed equity capital; for the purposes of this provision, “limited liability company” refers, in particular, to the kinds of companies mentioned in appendix I of Directive 2013/34/EU (1) and “equity capital” includes, where appropriate, all issue premiums.

• If it is a company in which at least some partners are subject to limited liability for the company’s debt (which is distinct from an SME which has traded for under three years or, for the purposes of the criteria to be eligible for risk financing aid, an SME, within seven years of its first commercial sale, which meets the conditions to receive risk financing investments after the due diligence checks by the selected financial intermediary), when more than half its own funds recorded in its accounts have disappeared as a result of the accumulated losses; for the purposes of this provision, a “company in which at least some partners are subject to limited liability for the company’s debt” refers, in particular, to the kinds of companies mentioned in appendix II of Directive 2013/34/EU.

• When the company is subject to bankruptcy or insolvency proceedings or meets the conditions set out in its national law to be subject to bankruptcy or insolvency proceedings upon application from its creditors.

• When the company has received salvage aid and has not yet repaid the loan or ended the guarantee, or has received restructuring aid and is still subject to a restructuring plan

• If it is a company other than an SME when, during the previous two financial years: the company’s debt/capital ratio was greater than 7.5 and the company’s interest coverage ratio, calculated on the basis of the EBITDA, it was below 1.0

A guarantor is an individual businessperson or a legal person who guarantees the payment of the credit.

Risk rating of each debtor including included in the classification endorsement and used as a starting point for setting the commercial risk premium rate.

Risk rating of the debtor’s country included in the classification endorsement and applicable for the purposes of calculating the premium rate for coverage of political risks.

De facto insolvency is a credit remaining in default for 2 months as from the notification of default or from when it fell due if that is later.

De facto insolvency is a credit remaining in default for 2 months as from the notification of default or from when it fell due if that is later.

Final insolvency is the insolvency of a debtor and, where appropriate, the guarantor in any of the following circumstances:

1) Non-appealable court ruling opening the liquidation phase as part of bankruptcy proceedings in Spain or a like ruling in bankruptcy or similar proceedings in another country involving permanent default on the credit.

2) The reduction set out in a court settlement or accepted in advance in an out-of-court agreement.

3) A writ of execution or a writ of collection which does not provide sufficient assets to meet the payment.

4) Agreement between insured and insurer declaring the credit uncollectable.

The risk limit is the maximum amount of the insurable credits on each debtor set in the classification endorsement.

A contract according to which a financial institution is bound to make available to an individual businessperson or legal person a certain sum of money, within an agreed limit and for a term set out in the contract. Read more about credit policies. 

A contract between an individual businessperson or legal person and an insurance company specifying the obligations and duties of each of the parties as regards the terms and conditions to which they both parties are subject concerning the scope and coverage of the insurance.

Read more about insurance policies

The percentage coverage is the percentage set out in the classification endorsement specifying the distribution of the risk between the insurer and the insured and that, in the event of a loss, it will be applied against the risk limit or against the insured credit if this were lower in order to determine the amount of the indemnity.

The premium is the price of the insurance to which the insurer has the right in any event. The premium is indivisible and due in full for the coverage of the risks and for the indemnification by the insurer of any default by debtors whose coverage has been activated.

The possibility that a creditor will suffer losses derived from a partial or total default on the credits granted to its customers/debtors in a financial or commercial transaction.

Read more about credit risk

The difficulty a company may have meeting its short-term payment obligations due to the inability to convert its assets into liquidity without incurring losses.

Read more about liquidity risk

Export credit insurance offers coverage to those participating in international trade transactions, both exporting companies and investors such as banks, against the political, commercial and extraordinary risks associated with operating internationally.

Read more about Export Credit Insurance

A document in which the insurer sets out the terms and conditions according to which it will bear the risk with respect to each debtor, specifying the date the coverage takes effect, the risk limit, the percentage coverage, the debtor’s rating group and premium rate applicable to commercial risks and maximum payment condition or the debtor’s country’s rating group, premium rate and percentage coverage applicable to political risks covered.

A rate set out in the classification endorsement that will be applied to the amount of the notified sales that the insured has made to the debtor which each classification endorsement has been in place. It is calculated against each notified sale per the classification endorsement for commercial risks and the premium rate for political risks covered by the contract.

The policyholder is the company that takes out the default risk coverage service and assumes the obligation to pay the premium and the other obligations and rights the service entails.

A sale is a commercial transaction made irrevocable by the provision of the merchandise according to the commercial contract, due to delivery of the installation or by fulfilment of the service and which is proven according to the contract..