A

Aggregate First Loss
The total value of insured losses which must be incurred in a policy period and bourne by the Insured before the Insurer becomes liable in respect of that policy period.

Aggregate Liability
The amount of liability under a new policy period and a previous policy period, or a policy issued under other Insurers.

Annual Limits Charge
A Discretionary fee levied at the start of each policy period to cover the Insurer's expense in responding to limits application, based on traffic in the preceeding policy period or an estimate for the first period.

Approved Source
An information source approved by the Insurer which may be used by the policy holder as justification for credit granted under the discretionary limit.

Assignee
The Company (usually a Bank or Financial Institution) to whom benefits of the policy are assigned by the Insured.

Assignment
An instruction to the Insurer to pay a third party any amount payable under the policy in respect of a specific Bill of Exchange.

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B

Buyer Review
A review of the Insurer's exposure on a particular buyer using letters to all or selected Insureds enquiring into the use of permitted Credit Limits. Details requested of outstanding amounts and orders in hand.

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C

Customer Review
A review of the Insurer's exposure on a particular buyer using letters to all or selected Insureds enquiring into the use of permitted Credit Limits. Details requested of outstanding amounts and orders in hand.

Capitve Policy
A re-insurance agreement where the Insurer re-insures the in-house Credit Insurance policies of large corporations.

Catastrophe Cover
A general term used to describe a policy incorporating a substantial First Loss. Credit Control practice and procedures will need to be first class if they are to reap the benefit of this type of cover.

Commercial Risk
The risk of Insolvency or Protracted Default by a buyer. This may include the failure to accept goods in export sales (each policy will need to be individually inspected).

Company Number
When an individual Limited Company is formed it is given a Company Number, individual to itself, which it keeps even if it changes its name, until dissolved. This number is also referred to as the Registration Number.

Compulsary Liquidation
The liquidation of a company ordered by the Court, as a result of a petition presented to the Court by a Creditor or Director.

Confirmation of Debt
A statement of undisputed admission, usually given by an Insolvency Practitioner, confirming that the debt(s) on which a claim is based exists in the books of the buyer concerned; identifying the creditor and the amount of the debt.

Confirmed Irrevocable Letter of Credit
The most secure form of documentary credit, where a Bank in the Exporter's country assumes the payment obligation of the issuing Bank by adding it's confirmation.

Consigment Stock
The practice of holding the supplier's stock at the buyer's premises which is traditional in certain trades. There must be a formal agreement under which invoices are drawn on the buyer as he withdraws goods.

Credit Limit
The amount of cover the Insured has on a particular buyer.

CVL
The liquidation of an insolvent company, which is commenced by resolution of the shareholders, but where the creditor's have ulitmate choice of Liquidator.

Creditor's Voluntary Liquidation
The liquidation of an insolvent company, which is commenced by resolution of the shareholders, but where the creditor's have ulitmate choice of Liquidator.

Current Assets
Cash, or other assets readily converted into cash. For example, stocks, debtors and short term investments.

Current Liabilities
Amounts which fall due for payment within 12 months of the Balance Sheet date (e.g. creditors, bank overdrafts, current taxation, etc).

Current Ratio
A calculation made to show the strength of the working capital position. This is obtained by dividing Current Assets by Current Liabilites. The higher the ratio in favour of those assets, the greater protection for trade creditors.

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D

Datum Line Policy
A policy covering accounts which exceed a given level of outstandings during the policy period, or in the 12 months prior to the inception of the policy, provided that cover for that buyer has been endorsed for the Insured.

DSO
The average number of days taken by a company to collects it's debts.

Days Sales Outstanding
The average number of days taken by a company to collects it's debts.

Declaration of Turnover
A statement of the Insured's turnover, for a specific period, which is covered under the policy. This is normally required annually.

Del Credere Agent
An Agent who can accept the risk on behalf of the principle, most common in the timber trade.

DL
The value up to which the Insured may trade with a company without prior reference to the Insurer. The value of credit granted must be justified under the terms and conditions of the policy, normally via trading experience or a satisfactory status report.

Discretionary Limit
The value up to which the Insured may trade with a company without prior reference to the Insurer. The value of credit granted must be justified under the terms and conditions of the policy, normally via trading experience or a satisfactory status report.

Dissolved Company
A company, which has been wound up (by a Winding Up Order), has completed the process of Voluntary Liquidation or has been ""struck off"" the ""live"" index of companies (under section 652 of the 1985 Act) and therefore no longer exists.

Dividends
The return paid to shareholders on their investments. (Usually in the form of a bonus payment every six months). Dividends on preference shares are fixed, while dividends on other shares are not fixed and depend on the amount of profit made by the company

Documentary Bill of Exchange
Documents of title along with the drawn Bill of Exchange are sent through the buyer's Bank. Against the acceptance of the Bill of Exchange, the buyer can receive documents of title.

Documentary Sight Draft
Payment is made at the time of the handing over of the documents. A Bill of Exchange which is drawn at sight (payable immediately on view) is attached to the shipping documents and these are released when the amount of the sight draft has been paid.

Documents Against Acceptance
Documents are accompanied by a Bill of Exchange drawn for the period of credit arranged. The documents are handed to the buyer against his acceptance of the Bill of Exchange, which is retained by the exporters Bank until maturity, when it is presented.

Domestic Companies
Those that are domiciled within the UK, the Channel Islands or the Isle of Man. All other companies are known as foreign.

Dormant Company
A limited company that has never been started, or has ceased its trading but has not been dissolved. Annual Returns are filed, but accounts state that the company did not trade during the year.

Due Date
The date on which an invoice is due for payment.

Shell Company
A limited company that has never been started, or has ceased its trading but has not been dissolved. Annual Returns are filed, but accounts state that the company did not trade during the year.

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E

Each and Every First Loss
An amount, which is bourne by the Insured before the uninsured percentage of the balance of the insured debt is calculated.

Ex-Gratia
(As an act of grace) This refers to a payment made by an insurer against a claim for which he has no strict liability.

Extraordinary General Meeting
Apart from a company calling an Annual General Meeting of its shareholders, it will also call what is termed an Extraordinary General Meeting of the shareholders if it wants to make a change to the company, such as change of name.

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F

First Loss
The value of any losses to be bourne by the Insured, the purpose of which is to either eliminate small claims, or to act as a form of risk sharing.

Fixed Assets
Tangible and intangible assets with a relatively long life, acquired to produce goods or services and not intended for resale.

Fixed Charge
A form of security granted over specific assets, preventing the debtor dealing without the consent of the secured creditor. The creditor can usually appoint a receiver to realise those assets in the event of default over which the charge is levied.

Floating Charge
A form of security granted to a creditor over the general assets of a company which may change from time to time in the normal course of business. If default occurs the secured creditor can appoint an administrative receiver.

Fraudulent Trading
Carrying on business with the intention of defrauding creditors.

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G

Goodwill Intangibles
Goodwill only features in a company's balance sheet after it has made an acquisition. It represents the excess of the purchase price over the Net Worth of the acquisition and is depreciated on the Balance Sheet over a five year period.

Gross Profit
Net sales less cost of goods sold, but before interest, tax and extraordinary items.

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H

Held On Cover
A situation where existing policy terms and conditions continue to apply after the normal period end date is reached. This normally applies when requested and while renewal terms are being negotiated.

Holding Company
A company is formed for the purpose of exercising financial control over a number of operating companies by buying up all or the majority of their shares. A company has a controlling interest in another when it has acquired over 50% of issued shares.

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I

Inception Date
The date on which an insurer's liability commences.

Indemnity
The percentage of the insured loss which is covered by the Insurer.

Insured Percentage
The percentage of the insured loss which is covered by the Insurer.

Insolvent
The terms used to describe a person or company if they are unable to pay their liabilities as they fall due. Strictly speaking, a company is also insolvent if the value of its assets is less than the amount of it's liabilities.

Insured
A company which currently has an Insurance Policy.

Insured Buyer
Any buyer carrying on business in any of the countries specified in the schedule of the policy but excluding any buyer where the limit specified by the Insurer is nil.

Intangibles
Financial statement items such as patents, trademarks, goodwill etc.

Irrevocable Letter of Credit
A letter of credit which can only be cancelled with the agreement of all parties.

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J

Joint Insured
The principle policyholder where there is more than one policyholdern endorsed to the policy.

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L

Lead Insured
The principle policyholder where there is more than one policyholder endorsed to the policy.

Leveraged Buy Out
Where the ownership of a company changes through a party or number of parties acquitting the controlling interest of the company using a high level of debt. Some consultancy firms are beginning to specialise in this field.

Limit Endorsement
Evidence of an approved credit limit.

Limited Liability
The liability of the shareholders in a limited company, Private or Public, is limited to the face of the shares held. If therefore, the shares are fully paid, the shareholder has no liability for the debts of the company.

Limited Liability Company
A company formed to carry on a trade or business where the shareholders (""owners"") responsibility for the debts of the company is limited to the nominal value of the shares they hold in the company.

Liquidation
The process whereby a company has its assets realised and distributed to satisy its liabilities and to repay its shareholders.

Losses Arising
Cover only applying to losses arising out of deliveries made (etc) during the policy period. This is standard for the vast majority of policies.

Losses Occuring
Cover only applying to losses occuring during the policy period even though the risk may have attached before the inception date.

Loss Ratio
Claims for a policy period (including reserves set) as a percentage of premium earned for the same period.

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M

Main Trading Name
The name and address by which a company is best known, and under which the majority of trading takes place.

Management Buy In
Where a group of managers, external to the company, buy into a company and acquire a controlling interest.

MBI
Where a group of managers, external to the company, buy into a company and acquire a controlling interest.

Management Buy Out
A situation where the management of a company buy the business as a going concern.

MBO
A situation where the management of a company buy the business as a going concern.

Maximum Extension Period
The period of time for which the Insured may postpone the original date of an invoice without notifying the Insurer once that date has been passed and the debt has not yet been paid. Once this period has expired the debt must be reported as overdue.

MEP
The period of time for which the Insured may postpone the original date of an invoice without notifying the Insurer once that date has been passed and the debt has not yet been paid. Once this period has expired the debt must be reported as overdue.

Member's Voluntary Liquidation
The solvent liquidation of a company which claims that it is able to settle all of its debts in full within 12 months of being placed in liquidation.

Memorandum of Articles and Association
A document drawn up when a new company is formed giving title to the company, details of the types of business that can be undertaken, location of registered office, limitation of liability and capital structure. This may then be changed or amended.

Minimum Retention
A First Loss, where either the amount of minimum retention or the uninsured percentage, whichever is the larger, is deducted from the insured loss.

Moratorium
When a debtor seeks from some, or all of its creditors, an extended period of time in which to repay a debt or loan. This is often accompanied by an arrangement to pay cash for all purchases being made during the period of Moratorium.

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N

Net Worth
Indicates the financial strength of a company and comprises of issued capital, share premium, capital reserves, any general reserves, profits and losses etc, Grants/Donations etc. Calculated as Total Assets minus current and long term liabilities.

No Claims Bonus
The percentage by which the premium rate is reduced if the Insured does not make a claim during that policy period.

NCB
The percentage by which the premium rate is reduced if the Insured does not make a claim during that policy period.

Non-Binding Indication
An indication of terms on which the Insurer may be willing to issue a policy but without prejudice on the part of the Insurer.

NBI
An indication of terms on which the Insurer may be willing to issue a policy but without prejudice on the part of the Insurer.

Non-Qualifying Loss
A level of loss below which there is no claim under the policy. Operates like a Threshold.

NQL
A level of loss below which there is no claim under the policy. Operates like a Threshold.

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O

OECD
Organisation for Economic Co-Operation and Development. Comprises the major industrial and developed countries of the world who contribute information, financial support and economic planning.

Organisation for Economic Co-Operation and Development.
Comprises the major industrial and developed countries of the world who contribute information, financial support and economic planning.

Overdue Account
An account which remains unpaid at the expiration of the due date.

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P

Partnership
A type of business unit where two or more persons join together to carry on some form of business activity.

Policy Period
A particular period of a perpetual policy, during which one set of conditions apply, represented by period start and end dates. Several policy periods may exist for one policy.

Policy Type
Within the policy category, a policy may be defined as being of a certain type, thus defining the conditions and clauses, which can apply to it.

Political Risk Cover
This covers inconvertibility (the failure to tranfer foreign currency), public buyer default and contract frustration or cancellation as a result of events outside the control of the exporter and his buyer (e.g. war, import licensing etc)

Preferential Creditors
Such creditors are paid in priority to the holders of floating charges and in priority to unsecured creditors. They include PAYE, VAT and employees renumneration.

Premium Rate
The percentage of a company's insurable turnover which the Insurer charges for insuring its credit risks.

Profit Margin
A measurement of trading success - take pre-tax profit/loss as a percentage of sales turnover.

Proposal Form
The form on which the prospective Insured applies for a Credit Insurance policy.

Proprietor
The person running the business.

Sole Proprietorship
The type of business unit in which only one person is liable. It is the simplest form of business organisation. The owner is repsonsible for all management decisions, takes all profit and bears all risk.

Protest
Under English Law, when a Foreign Bill of Exchange has been dishonoured it must be noted and then protested. Protesting is the drawing up of a document certifying that the Bill was presented for payment and refused.

Protracted Default
A reason for a claim under the policy. Protracted Default occurs 90 days after the due date (or postponed due date). These claims are payable 6 months after Protracted Default has occurred, provided that the debt is not in dispute.

PD
A reason for a claim under the policy. Protracted Default occurs 90 days after the due date (or postponed due date). These claims are payable 6 months after Protracted Default has occurred, provided that the debt is not in dispute.

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Q

Quarterly Advanced Deposit Premiums
The amount of premium payable to the Insurer on or before the start date of the policy, and then 3, 6 and 9 months thereafter.

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R

Registered Name
The legal name of a Limited Company as registered at CRO. (This may not be the name by which a company is known or under which it trades - see Trading Style).

Registered Office
A Limited Liability company must have what is known as a Registered Office. This is the official address for legal purposes (where it may always be found) and which must be used if service of process is required to be made against the company.

Reservation of Title
A clause in the contract of sale under which the seller retains title to the goods until final payment is made.

Reserves
The value of net assets over and above the issued capital.

Retained Deposit
Premium deposits which are not returned to the Insured should it fail to meet the estimated turnover for that year.

Retained Earnings
Also known as P&L account or Revenue Reserves, they represent the accumulative net income not to be paid out as dividends etc., from previous finanical years, and is not transferred to the other Reserves and carried forward to the Balance Sheet.

Revalution Reserve
Amount arising from the appreciated value of property; the difference between the former book value of the property on the Balance Sheet and present (revalued) book value of the property.

Reverse No Claims Bonus
The percentage by which the premium rate on a policy increases if that Insured takes a payment of a claim relating to that policy period.

RNCB
The percentage by which the premium rate on a policy increases if that Insured takes a payment of a claim relating to that policy period.

Rights Issue
An issue by a company of new shares which are offered, usually at a price below market value, to existing shareholders of the company, in proportion to their present holdings.

Risk Attaching
Cover only applying to risk attaching during the policy period.

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S

Salvage
Monies (or any advantage) available to an Insured to reduce the amount due from an insured buyer at the date of insolvency or crystallisation date, whichever is the earlier.

Schedule of Policy
The section of the policy which details who the Insured is, trade sector, policy period, annual limits charge (if applicable), premium deposits and when they are due, countries endorsed, indemnities, discretionary limits etc.

Secured Charges
Created when a company borrows money against security. The company is then required to register information about such charges at the Company's Registry.

Secured Creditor
A creditor who holds charge (debenture) granted by a debtor over the property of the debtor. As a result the creditor has a right of priority for the repayment for its debts, the exact priority depending on the type of charge.

Share Premium
The amount paid to a company by shareholders, in cash or other consideration, over and above the amount the nominal value of the shares issued to them.

Shares
The nominal capital of a limited company is divided into shares which may be in units of £1 or more, or 50p or as small as 0.05p. There are three main types of shares, Preference Shares, Ordinary Shares and Deferred Shares.

Preference Shares
These are shares yielding a fixed rate of dividend. No dividends may be paid to any other class of shareholder unless the preference dividend had been paid in full. The preference shareholders usually exercise no control over the management of a company.

Ordinary Shares
The Ordinary Shares of a joint stock company are those which entitle the holders to participate in the control of the company and receive a share in the profits by way of dividend.

Deferred Shares
These shares are a type of shares issued by a joint-stock company; the deferred shareholders will receive a fluctuating rate of dividend after the preference shareholders have been paid their fixed rate in full.

SIC Code
Standard Industrial Classification Code. Used to classify industrial trades.

Standard Industrial Classification Code.
Used to classify industrial trades.

Solvency
The ability of a business to meet its liabilities as they fall due.

Specific Account Policy
A Credit Insurance policy which bases its cover on certain specified buyers. The named buyers are the only ones covered. Premium may be focused on a fixed amount or on the balances declared at the end of an agreed period.

Status Agency
A company which sells reports on companies and individuals.

Stock and Work In Progress
Represents the current estimated value of stocks after allowing for any deduction in respect of damaged or obsolete stock together with the director's assessment of the value of the work in progress.

Stock Turnover
Measure sales turnover as a ratio of stocks, and is intended to show how fast stock is moved. The higher the score the more liquid the position.

Subsidiary
A company which is over 50% owned by another company.

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T

Take Over
An offer by one company to another, for a large proportion or all of its share, to bring it under control of the acquiring company.

Threshold
The total amount of any individual loss an Insured must incur before the Insurer becomes liable for the insured percentage of the total amount of the loss incurred, not just that portion above the threshold.

Trustee in Bankruptcy
The Insolvency Practitioner appointed to administer and release the assets of a bankrupt, and distribute the proceed for the benefit of the bankrupt's creditors.

Turnover
The net value of sales made during a financial period.

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U

Unlimited Liability
A person or business form is stated to have unlimited liability when the person or owners of the business are liable for all debts of the business.

Unsecured Creditor
A creditor whose claim against a debtor has no secured prior rights, whether in relation to a company in liquidation or a bankrupt.

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V

Voluntary Arrangement
The procedure whereby a scheme or arrangement, usually involving delayed or reduced payments of debt is put forward for approval by creditors. The scheme is under the control of a supervisor.

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W

Winding Up Order
An order made by the Court that a company should be wound up and a liquidator appointed to Wind Up its affairs, after an interested person or company has successfully petitioned the Court for this action.

Winding Up Petition
A petition presented to the court seeking an order of the court (a Winding Up Order) that a company be put into compulsary liquidation.

Working Capital
The excess of current assets over current liabilities. Used to indicate the funds available for conducting day-to-day business.

Work In Progress
The value of the unfinished goods still in the production line. This value includes the material value and the value of work put into the product so far.

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