By including Contract Risk, the insured does have the certainty that specifically incurred costs related to the order and already incurred expenses are also insured before delivery.
If an insured only has cover for credit risk in the policy and cover for new risks is terminated by the credit insurer, the insured itself will have to decide: either stop deliveries and risk being sued for its obligation to deliver, or continue to deliver but without cover. With contract risk, the insurer must be contacted to seek permission to deliver under cover. If insurer does not agree, damages will have to be paid.
Points of interest
- The contract with the debtor must have been concluded during the policy term. If you want to co-insure contracts from before the policy effective date, please contact Xolv.
- Be careful when talking about a 'framework contract'. This often does not meet the requirement of contracts stated in the contract risk module. A contract should include a clear payment and purchase obligation. This is because if a debtor fails to honour the contract, it should be possible, based on the terms, to hold the debtor to its obligations.
- A framework contract is often just a declaration of intent without firm commitments. The text reads, for example, "We plan to take 1,000 sq m, but we will let you know when".
- Sometimes there is a construction with call-off orders. This may fall under the Contract Risk cover, provided it is clearly stated in the main contract that one will definitely order and purchase before a certain date. The moment of call-off is then the original contract in accordance with the policy provisions. So there should always be an obligation to purchase with a final call-off date. The execution period starts as soon as one calls off an order. Note that both the call-off and delivery fall within this period.
- From the moment the contract is concluded, the longest execution period begins to run. It ends at the time of delivery. If you foresee that your production will exceed the longest execution time, you should contact Xolv immediately. This could happen, for example, if a strike breaks out in the supplier's country and the ordered parts arrive later.
- If it has been agreed that a certain amount will be paid upon signing the contract and this payment does not take place, you should report it. This also applies if the parties have agreed that instalment payments should be made during the contract risk phase.
- Please note that only costs and expenses incurred specifically for the order are eligible for compensation under Contract Risk.
- When can you claim compensation under Contract Risk? In case of: a) Insolvency or b) Limit Withdrawal and after the credit insurer has given explicit permission to stop the performance of the contract. This implies that you should always contact us in case something threatens to go wrong. If, in the event of an automatic cessation of cover, you would independently decide to stop or continue the performance of the contract and deliver without contacting the credit insurer, you run the risk of having no cover under the policy.
- For the amount of the limit request, you have to take into account the outstanding amount plus the costs and expenses incurred for the part still in production.
- Contract risk cannot be applied in various circumstances. For example, in cases of consignment or rental and further in various sectors, such as transport and the secondment/temporary employment sector.
