Virginia Leaders in Export Trade (VALET)

MARSH TRADE CREDITTom Corbett

28 October 2011

Introduction

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The Marsh Global Trade Credit & Political Risk Practice

Trade Credit Practice

• 277 global specialists in 43 countries– Globally coordinated– Multinational service team crosses geographic boundaries– Significant investment in people and technology– 15 specialists in the US

Political Risk & Structured Credit Practice

• 27 global specialists in US, UK, Paris, Spain, Canada, Australia, China, India and Singapore– Wholesale single debtor team based in London access alternative markets– Expertise in contract risk cover, medium term vendor financing and direct

investment risks which complements our trade credit team– Expertise in structuring equity policies which insure company’s assets (property

and equipment) in emerging markets

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Marsh Global Trade Credit Network

No Marsh Affiliation

Marsh Office

Marsh Correspondent

Marsh Trade Credit Personnel

Trade Credit Insurance

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Key Benefits of Trade Credit Insurance

Risk Mitigation (Balance Sheet Protection):

Insolvency and Protracted Default (late payment) protection for receivables

Increase Sales and expand competitiveness:

Extend more credit to customers while reducing the risk of non-payment

Facilitate Financing (Increase Borrowing Power):

Increase borrowing power and reduce financing costs by using the insured A/R as collateral, Increase availability of credit lines, and reduce interest rate.

Reduce Bad-debt Allowance:

Reduce your allowance for bad debts reserve.

Improve Cash-flow:

Receive payments for insured, undisputed, unpaid invoices

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What Credit Insurance Isn’t

•It is not the solution when your customer is on the steps of the bankruptcy court

•It is not the solution when your customer’s newest employee is the

“Chief Restructuring Officer”

•It is not the solution when your customer’s phone is disconnected

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You can make credit insurance sound very complicated, use specialized terminology and describe it in sophisticated financial terms but it is in fact a simple product

Credit insurance can cover all your receivables, part of your receivables, key customers, separate business units, international, domestic or even single buyers

Trade Credit Insurance

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Credit Insurance Basics

Three Critical Issues

1) Customer Credit Limits

2) Premium amount

3) Risk Retention

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Customer Credit Limits

First and foremost you need to have the credit insurer review your largest customers and determine whether the credit limits you need can be approved, without adequate coverage there is little to consider.

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Premium amount

If there is coverage available for your customers then the next question is at what cost? The policy premium either will or won’t make sense to your company based on your risk appetite and your profit margins.

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Risk Retention

• Deductible aka AFL (Aggregate First Loss)

No losses are payable under the policy until the dollar amount of the deductible is met

• Coinsurance

Percentage participation in losses by the insured, usually 80%-95%, most commonly 90%

Adjustments in Deductibles and Coinsurance will impact premium

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Policy Variables

Policy conditions to be considered:

• Cancelable or non-cancelable limits

• Insured percentage

• Annual deductible

• Non-qualifying loss amount

• Individual buyer limits

• Discretionary limit

• Insurer’s maximum policy liability

• Covered terms of sale

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Closing

No fees or costs of any kind to investigate and apply for trade credit insurance and you will receive the insurers credit assessment of your customers as well as they view/price the risk in your accounts receivable portfolio

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Tom Corbett

Vice President

Marsh Trade Credit Practice

12 Fox Run

Denville, NJ 07834

Office:973-394-0523

Mobile: 973-879-6614

Fax: 973-215-2594

Tom.f.corbett@marsh.com

http://global.marsh.com/services/tradeCredit.php

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QUESTIONS

This document and any recommendations, analysis, or advice provided by Marsh (collectively, the “Marsh Analysis”) are intended solely for the entity identified as the recipient herein (“you”). This document contains proprietary, confidential information of Marsh and may not be shared with any third party, including other insurance producers, without Marsh’s prior written consent. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modeling, analytics, or projections are subject to inherent uncertainty, and the Marsh Analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Except as may be set forth in an agreement between you and Marsh, Marsh shall have no obligation to update the Marsh Analysis and shall have no liability to you or any other party with regard to the Marsh Analysis or to any services provided by a third party to you or Marsh. Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or reinsurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage.

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