Credit insurance is the protection given by the insurance company to the bank or non-bank financial institutions as the top risk of the failure of the debtor in paying off a credit facility or cash loan provided by bank/non-bank.
Credit insurance are bi-party agreement between the bank/non-bank with an insurance company.
In this case, the debtor does not include the parties in agreement over insurance coverage of the disbursed credit bank or non-bank to the debtor.
Indemnity insurance companies ranged from 70% to 80% of the magnitude of the loss to the bank or non-bank.
Types of Credit Insurance
- Working capital credit insurance (KMK) construction projects for Transactional/non construction, procurement of goods/services, the financing of receivables, financing bills/stock/goods and Pre-export Financing;
- KMK Insurance General Revolving/Current Account;
- KMK Aplofend General Insurance;
- Credit Insurance Investment/Project Financing;
- Executing pattern of micro-credit insurance to financial institutions (BPR/BPRS, cooperatives/Cooperative Loan/Employee/Employee Cooperatives Cooperatives/Cooperative Sharia financial services/KJKS);
- Micro-credit insurance patterns channeling, directly to end-users (individuals/employees/employee);
- Credit insurance for food security and energy (CTF-E); as well as the
- Insurance Mortgages (MORTGAGES)
Benefits Of Credit Insurance
For Banking
- Transactions that are not bankable because it does not meet the requirements of collateral but feasible can be aided by the existence of the insurance, which can replace a portion of the required banking collateral in support of granting credit to the sector real;
- For non-cash loan transactions in particular, depends on the risk assessment based on analysis of the risks of insurance companies which also consider the analysis of banks. Insurance companies can provide a guarantee to 100% of the value of non-cash loans given by banks and collateral requirements/collateral are lighter for customers;
- Reducing the risk premium so that the lending rate can be more competitive. The credit risk transferred to the insurance can be taken into account as a decrease in the element of risk in the pricing of interest rate;
- Fee-based income and the placement of cash collateral of the debtor in the bank so that the bank can draw benefits from the Fund;
- By utilizing the insurance facility, the bank has developed a strong strategic partnership with one of the safety net (safety net) of the banking credit risk against the disalurkannya. The Bank does not have to bear the entire burden of own losses (100% own retention) that in the long run can result in catastrophic risks, in a manner likely to divert the risk of losses to the insurance;
- Insurance coverage against the risk analysis/assurance that shall be given banking to insurance. Thus, the bank will obtain a second opinion from an insurance company;
- Insurance companies can provide the top referral clients that have a good track record of being able to utilize the facilities of the bank; and
- Banks more competitive, courageous and passionate in disbursing loans to the real sector with the credit protection and incentive nonsubsidi the benefits above. Thus the function of banking intermediation in particular to financing the real sector will increase.
Benefits For Real Sector/Debtor
- The real sector would be helped by the existence of liquidity insurance products that became the bridge connector between the real and banking sector;
- Competitiveness of the real sector would be it helpful enough liquidity as well as through credit facilities with better interest rates because of the bank’s financing is supported by insurance companies; as well as the
- New jobs would be created so as to reduce the unemployment rate.