Borrowing Base Adjustments Following Credit Insurance Withdrawal Events
Credit insurance cancellations trigger immediate borrowing base contraction, forcing manual eligibility recalculations, concentration caps, and cash cure demands.
Top up Insurance Policy
Meaning
Secondary indemnity contracts provide additional coverage limits on top of a primary policy to protect against catastrophic losses. A top up insurance policy is purchased when the maximum liability limit of the standard policy is insufficient for the firm’s risks. This coverage is triggered only after the primary policy has been completely exhausted.
Coverage Expansion
High-value operations like ocean shipping or heavy construction often require limits that exceed what a single insurer will write. Acquiring a top up insurance policy allows the firm to assemble a layered insurance program that covers their total exposure. This approach helps the company secure necessary permits and satisfy the risk requirements of large clients.
Risk Allocation
Dividing the liability among multiple insurance providers lowers the risk for each individual firm. While the primary insurer handles the routine claims, the provider of the top up insurance policy is only exposed to rare, severe events. This risk division results in lower premium rates for the additional layers of coverage.
Claim Settlement
Resolving a major claim involves both insurers coordinate their investigations to confirm the loss. Because the top up insurance policy sits above the primary layer, its payout is contingent on the primary insurer first agreeing to pay their full limit. This structure can lead to longer settlement times if there are disputes between the different insurance companies over liability.
Clear documentation of the primary payout is required before the secondary provider will release any funds.