Sullivan Advises ITFA on Revised Guidelines for CRR Compliant Non-Payment Insurance Policies

11.06.2019 | Press Release

(London) – International law firm Sullivan has advised ITFA (the International Trade and Forfaiting Association), on its recently published revised guidelines on the structure and content for Capital Requirements Regulation (CRR) compliant non-payment insurance policies.

Their publication follows significant market debate over the eligibility of insurance as a credit risk mitigant for CRR purposes, over the past year.

The drafting of the CRR left significant room for interpretation, and some financial authorities subsequently engaged in consultations to provide clarification, including the UK’s Prudential Regulation Authority (PRA) and the German Federal Financial Supervisory Authority (BaFin), in 2018.

Both financial regulatory bodies considered the issue of when insurance cover complies with the eligibility criteria relevant for “guarantees” as defined in the CRR, thereby enabling banks to reduce risk-weighted assets. The consultation process in 2018 provided an opportunity to better inform the regulator about the processes and practical use of the non-payment insurance product for trade and transaction banking.

Following the consultation process, the PRA modified its original view on several points in its revised Policy Statement (PS8/19) which was published in March 2019 and also clarified how the CRR should be understood and applied in order to achieve regulatory capital reduction through the use of insurance.

In light of these clarifications, ITFA reviewed its guidelines on the structure and content for CRR compliant non-payment insurance policies. ITFA members can view the revised guidelines on its website.

The most significant changes as a result of the PRA’s clarifications can be seen in the amendments to the definitions of the waiting period; exclusions in insurance policies; and the PRA’s revised guidance on the expression “clearly defined and incontrovertible.”

The guidelines also now include an Annex providing some market-standard wording for certain clauses, including those relating to nuclear exclusions and sanctions.

The Sullivan team advising in relation to the revised guidelines was led by the Head of the UK Insurance and Disputes Practices, Marian Boyle, with Managing Associate Hannah Fearn in London.

About ZAG / Sullivan
ZAG / Sullivan (Zysman, Aharoni, Gayer & Co.) is an international law firm with offices in Israel, the United States, China, and the United Kingdom. The firm’s attorneys specialize in all disciplines of commercial law for both publicly held and private companies, with particular expertise in high-tech, life sciences, international transactions, and capital markets. ZAG / Sullivan provides result-driven legal and business advice to its clients, addressing all aspects of the clients’ business activities, including penetration into new markets in strategic locations. In recent years, the firm has acted on a majority of the equity and debt financing transactions by Israeli technology companies on the NASDAQ. It has been the firm’s experience that the best results, those that give our clients the competitive advantage they need, are attained by coupling professional experience, global presence, and connections with the investor communities in Israel and abroad.

Adva Herrmann

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