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Risk advisory

Credit Insurance in US Structured Transactions

Insurance capital now sits alongside bank and institutional capital in credit structures. Where it fits depends on how the policy is written and who holds it.

December 2, 2025 · 5 min read

By Consultinghouse GWB · Capital Mobilization & Structuring practice

01

Why it appears

Insurers hold long-dated liabilities and seek matching assets. Credit risk, taken through insurance rather than through lending, gives them exposure without the balance sheet treatment of a loan. For borrowers and arrangers this represents a distinct pool of capacity, which matters when bank appetite tightens.

02

The forms

Trade credit insurance. Cover on receivables, used both to protect a seller and to make receivables financeable at better advance rates.

Surety bonds. A guarantee of a contractor's performance or payment, standard in US construction and increasingly used in contexts that previously relied on bank letters of credit.

Credit risk insurance on loan portfolios. Insurers taking a tranche of credit risk on a bank's portfolio, releasing capacity.

Residual value and warranty structures. Cover on defined asset value outcomes, used in equipment and fleet financings.

03

What determines whether it performs

Indemnity versus guarantee. Most insurance is an indemnity: it responds to a loss the insured has actually suffered, after a claims process, subject to conditions. A bank guarantee pays on demand. Structures that treat a policy as though it were an on-demand instrument are misreading it.

Disclosure and warranties. Policies are voidable for non-disclosure of material facts. The diligence a broker does at placement matters, and the insured's duty is continuing in many forms.

Conditions precedent to payment. Notification periods, mitigation obligations, and cooperation duties. Breach of a condition can defeat a claim on a covered loss.

Who benefits. Whether a lender is an additional insured, a loss payee, or an assignee determines whether it can claim directly and whether the insured's conduct can prejudice it. Non-vitiation wording addresses this and should be negotiated.

Counterparty rating and concentration. The insurer's own credit is the backstop. Rating requirements and replacement obligations belong in the financing documents.

04

For arrangers

Insurance-backed structures can be excellent, and they fail in predictable ways: an insured who did not disclose, a lender who was not properly named, a claims process nobody had modelled for liquidity, or a reliance on a policy in circumstances the wording never contemplated. Read the policy as a financing document, because that is how it is being used.

Risk advisory

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