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Preference Claims: Protecting Creditors with Insurance

Preference Claims: Protecting Creditors with Insurance

When a company files for bankruptcy, creditors often face complex challenges, including the risk of preference claims. For businesses extending credit, these claims can be disruptive, jeopardizing their hard-earned payments. Fortunately, trade credit insurance provides a layer of protection that can safeguard your financial stability. 

Here’s what you need to know about preference claims and how trade credit insurance, offered by Securitas Global Risk Solutions, can mitigate the impact. 

 

What Are Preference Claims? 

Preference claims arise when a bankrupt company (the debtor) seeks to recover payments made to creditors during a specific period before filing for bankruptcy—often 90 days for general creditors or up to a year for insiders. The reasoning? These payments might unfairly favor certain creditors over others, reducing the remaining assets available for distribution among all creditors. 

For example, if your business received payment from a customer just weeks before they filed for bankruptcy, you could be at risk of a preference claim. The court may demand repayment, leaving your company exposed to financial loss and uncertainty. 

To better understand the complexities of preference claims, watch the video below: 

This video, presented by Lowenstein Sandler LLP, offers a concise explanation of preference claims and provides practical insights for creditors navigating bankruptcy proceedings. 

 

How Does Credit Insurance Cover It? 

Trade credit insurance is a proactive solution to mitigate the risks associated with preference claims. Here’s how it works: 

1. Nonpayment Protection
If your customer becomes insolvent, trade credit insurance ensures you are compensated for unpaid receivables, protecting your business’s cash flow. Unlike recovering through the bankruptcy process, insurance allows you to avoid lengthy and uncertain legal proceedings.

2. Coverage for Preference Claims
Policies can also cover amounts recovered due to preference claims. When courts demand repayment of funds previously received, a well-structured trade credit insurance policy helps safeguard your business from financial setbacks. 

At Securitas Global Risk Solutions, we specialize in crafting customized policies that address these risks, ensuring your business is protected from the unexpected. As Steiner Law Group notes, preference claims can catch creditors off guard, but trade credit insurance offers a vital safety net.

3. Guidance and Expertise
Beyond financial protection, Securitas Global Risk Solutions offers expertise to help your business navigate complex claims and disputes. Our partnerships with legal professionals ensure you’re equipped to handle challenges efficiently and effectively. 

 

Protecting Your Business with Trade Credit Insurance 

Preference claims can pose significant financial risks, but trade credit insurance provides the protection you need to stay secure. Whether you’re dealing with domestic or international accounts, having the right policy ensures you can focus on growth instead of worrying about potential clawbacks. 

To learn more about protecting your business with trade credit insurance, visit Securitas Global Risk Solutions or contact us directly. Don’t leave your receivables at risk—act today to safeguard your financial future.

Since 2004, Securitas Global Risk Solutions, LLC (“Securitas”) has helped clients develop credit and political risk transfer solutions that provide value on numerous levels. As an independent trade credit and political risk insurance brokerage, Securitas is focused on developing comprehensive solutions that meet the needs of clients, ensuring a complete understanding of policy wording and delivering excellent responsive service.

EXIM Bank Back to Full Financing Capacity

EXIM Bank Back to Full Financing Capacity

On May 8, the U.S. Senate formally confirmed three of the Trump administration’s nominees to the board of directors of the Export-Import Bank of the United States (EXIM).  The nominees include Kimberly A. Reed, confirmed as president and chairman of the board, Spencer T. Bachus III, and Judith DelZoppo Pryor.  Two additional nominees remain under consideration by the Senate.

The confirmation establishes a quorum of three members on the EXIM board of directors need for the bank to authorize transactions greater than $10 million.  EXIM had been operating since July 2015 without a full quorum and was limited in its ability to approve larger, typically long-term financing deals.

EXIM’s inability to fully conduct larger deals hindered its overall ability to support smaller transactions that typically assist small and medium-sized enterprises (SMEs) and to be self-funding—covering its operations on fees and interest it receives from its beneficiary clients.  In fiscal year 2018, EXIM reported $3.4 billion in transactions, down significantly from a high of $35.8 billion in 2015, and also forecast a $492.2 million operating deficit.  The Wall Street Journal reports that EXIM’s own internal estimates value the amount of lost transactions since mid-2015 at $21.5 billion.  While the restoration of EXIMs full financing capacity is welcome news to businesses seeking to increase American exports, EXIMs legal authorization will lapse on September 30, 2019 if Congress fails to reauthorize it past that date.

The Ex-Im Bank helps support U.S. exports through a range of programs, including guaranteeing loans to foreign buyers, credit insurance and some direct lending to foreign companies. To learn more about the range of products offered by the EXIM Bank, click here.

As a certified EXIM broker, Securitas has years of experience working with U.S. companies seeking to access EXIM’s services to help generate export-driven growth.  Offering services such as trade credit insurance and risk insurance, Securitas is able to provide these trade insurance solutions, often at no cost to the exporter, and then works with its customers structure insurance solutions that meet their goals of sustained and secure long-term growth.  In 2015, Securitas was named EXIM Broker of The Year.

Securitas is ready to help businesses, particularly SMEs interested in pursuing an export strategy, learn how to access EXIM’s services.

Links to these hearings:

EXIM Bank can get our exporters back in the game: https://bit.ly/2M3qrpY
Corporate Welfare Wins Again in Trump’s Washington: https://nyti.ms/2VW1C3z
Senate Revives Ex-Im Bank: https://on.wsj.com/2WhvhUb
The Senate is making a big mistake as it drags its feet over EXIM Bank confirmations: https://cnb.cx/2uJiAln

 

 

Guide to Export Credit InsuranceGet Your Free Guide to Export Credit Insurance

Why Securitas?

As an insurance broker rather than an insurance agent, Securitas Global Risk Solutions is able to apply to multiple carriers to find the best contract, with the most coverage, for the least cost. A carrier’s agent can only advise you as to that carrier’s specific contract. We have a team of experts who are available to you 24/7 to answer any questions or concerns. Additionally, our service comes at no charge to you.

Securitas to Participate in EXIM Bank’s 2019 Annual Conference

Securitas to Participate in EXIM Bank’s 2019 Annual Conference

Securitas Global Risk Solutions is pleased to note that it will once again be participating in the 2019 EXIM Conference, to be held at the Omni Shoreham Hotel in Washington, DC from March 28-29, 2019.  The annual event showcases the work of the EXIM Bank and brings together over 1000 business leaders, government officials and foreign dignitaries from across the world with an interest in promoting U.S. exports.

The EXIM Bank is an independent and self-sustaining federal agency that provides a range of trade financing solutions  – including loan guarantees, working capital guarantees, direct loans, and export credit insurance – to promote the sale of U.S. goods and services to foreign buyers.  To learn more about the range of products offered by the EXIM Bank, click here.

The focus of this year’s conference will be the role of trade in promoting national security, as well as highlighting EXIM’s role in assisting American energy and manufacturing sectors.  The program will include keynote speeches, panel discussions, as well as ample networking time for participants to discuss best practices, and export opportunities.

As a certified EXIM broker, Securitas assists U.S. exporters to identify, implement and manage the appropriate EXIM export trade credit insurance program to meet their goals of sustained and secure long-term growth.  Securitas provides these services at no additional cost to the exporter.  In 2015, Securitas was named EXIM Broker of The Year.

Securitas is ready to help businesses, particularly small and medium-sized enterprises (SMEs) interested in pursuing an export strategy and learn how to access EXIM’s export trade credit insurance programs.

The Psychology of Risk

The Psychology of Risk

When to buy Trade Credit Insurance

Risk management often requires a counter-intuitive approach, challenging ourselves to think through whether we have accurately assessed the possible risks that face our businesses. Planning for a range of outcomes requires an evaluation of downside risk. This runs counter to the optimistic view we naturally have for our efforts in building individual enterprises. Yet the recent bankruptcy of Toys-R-Us highlights why, even when times are good and indicators seem positive, “black swan” events can happen. The time to plan for those events is ahead of the crisis.

Imagine the scenario: It is August 2017. As the CEO of a toy manufacturing company, your firm is coming up on the biggest, most lucrative season of the year – the December holidays. Irrespective of tradition, the bringer of gifts will need some 21st century manufacturing support — your toy company is just the one for the job!

Knowing the retail toy sector is largely seasonal, your company team understands the traditionally longer manufacturing lead times needed to stock store shelves. They have worked hard, marketed and won contracts from the major toy retailers in advance of the big season. Your company also anticipated the early holiday shoppers and made sure products will be delivered by the middle of September. It is this holiday-season Accounts Receivable that will fund your firm’s working capital throughout a good portion of next year.

Now ask the question: Do you need trade credit insurance on those Accounts Receivable? Is it a luxury or a necessity? There is market concentration with a historically large buyer that could not possibly file for bankruptcy right before the holiday season, the best time of the year. You decide to gamble with that thought in mind.

Your CFO, however, has been reading the trade press on the difficulties facing the retail sector, as the major box stores wither under cost competition from online retailers. She recommends you take a look at insuring buyer risk, just in case retailing has indeed crossed a Rubicon and become an online enterprise. The is not really the news you want to hear going into the busiest season of the year — but then again, you made her CFO because she is willing to bring you the hard news. With a quick call to your credit insurance broker, you are able to line up a trade credit solution covering the risk concentration associated with a large buyer. As it turns out, this one call can be the move that saves your toy company. Unlike many of your competitors, you will now get paid for the shipped merchandise.

When everything is going well, accounts receivable are being paid and aging accounts are small, trade credit insurance might look like a luxury. However, it is also a good time to review your options and risks with an experienced trade credit insurance expert at Securitas Global. The premium rates can be lower with greater underwriting capacity. Even more importantly, markets recognize the value of supporting existing clients on credits like Toys “R” Us. Just prior to the bankruptcy filing, our Securitas Global team heard comments from vendors with respect to getting trade credit insurance on Toys-R-Us that included: “It’s expensive” and “We’re concerned, but we don’t think they’ll file yet.” When it became clear there would be a loss, and insurance was no longer available since underwriters will not insure a certain loss, the cost of protection became secondary. The conversation became one of whether any available coverage options existed.

The moral of the story: The time to put trade credit insurance in place is before there is a known risk. As one client shared “I have too much invested in my business to risk it because one of my customers can’t pay me.” Securitas Global can develop a customized solution to cover your needs at the right price point. We work with clients to determine their level of risk and how to allocate it then devise a policy that will cover their specific needs. This can include coverage for overseas buyers and ways to mitigate political risk. By insuring accounts receivable, we are able to preserve your firm’s working capital and support credit access.

Pamela M. Bates Joins Securitas

Pamela M. Bates Joins Securitas

PB

Securitas Global Risk Solutions is delighted to announce that Pamela Bates has joined our team to provide customized solutions to mitigate credit and investment risk in global markets.  Pamela will be based in Virginia, where, in addition to risk mitigation, she will provide strategic and policy advice to assist our clients in navigating international business opportunities.  Working for the U.S. Department of State for over two decades as a foreign service officer, Pamela managed U.S. diplomatic efforts on energy, information technology and government procurement issues.   In addition, she earned an MBA from the Wharton School.  Pamela brings the skills, knowledge and network to support our clients’ international expansion goals.

International markets provide outstanding opportunities for U.S. exporters to diversify their customer base.  Securitas provides risk mitigation strategies to help reduce the uncertainty associated with approaching new markets.  Pamela will concentrate on solutions ranging from mitigating private sector credit risk, sovereign contract frustration risk, financing international trade, protecting equity investments against political risk, along with government relations strategies, to bring products to global markets.

Having previously lived and worked in France, Germany, Switzerland, and Brazil, Pamela has an extensive network of contacts around the world. She speaks Spanish, Portuguese, and French, along with English.  While a State Department employee, she taught classes on diplomatic tradecraft, including how to evaluate sources of risk.  In addition to her MBA, Pamela earned a Bachelor’s degree in Economics and Environmental Studies from Bowdoin College in Maine and a Master’s degree in International Affairs from the Johns Hopkins University, School of Advanced International Studies.

Thank you for welcoming Pamela to Securitas team.