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Credit Insurance Claims Management & Recovery Services
Claims Management & Recovery Strategies
Aman Union 5th Annual Meeting
11 November 2014
Outline
• Our History & Network.
• Claims Management & Recovery Defined.
• Claims Management.
• Recovery Strategies.
– Amicable Recovery.
– Formal Recovery.
• Challenges Facing Formal Recovery.
• Recommendations.
3
History and Network
More than 30 years experience in international debt collection.
Our History Spain and Portugal
1980
1978
Founded
First collection in Italy
1983
Belgium, England and France
Scandinavia
Western Europe
Southern Europe
1990
1999
Eastern Europe
Europe
Latin America
China
2012
2011
Middle East
5
Iran & Arab World Country Coverage
• Morocco • Algeria • Tunisia • Libya
• Saudi Arabia • Yemen • Oman • United Arab Emirates
• Egypt • Sudan • Jordan • Lebanon
• Kuwait • Bahrain • Qatar
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Austria
Belgium
Bulgaria
Croatia
Cyprus
Czech Republic
Denmark
England
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Malta
the Netherlands
Norway
Poland
Portugal
Romania
Russia
Slovenia
Spain
Sweden
Switzerland
Ukraine
European Office & Coverage
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Argentina
Brazil
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
Trinidad & Tobago
Uruguay
Venezuela
Latin American Office & Coverage
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CLAIMS MANAGEMENT & RECOVERY
Claims Management vs Claims Recovery
Claims Management
• Wider scope, duration, and more
phases.
• Requires administrative skills.
• Requires credit insurance
knowledge.
Claims Recovery
• Focused on loss prevention or
recovery.
• Requires negotiation and
commercial skills.
• Requires legal knowledge and
knowledge of debtor’s industry.
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Scopes of Claims Management & Recovery
Pre-Indemnification Period
Scope of Claims Recovery (duration measured in years)
Internal Activities within the Insurer Activities of External Recovery Agency
Claim Analysis & Investigation 30+ Days
Internal Recovery Attempts
External Recovery Attempts
Claim Filed
90+ Days from default.
Commencement of Recovery Activities
120+ Days from default.
Appointment of External Agency
150+ Days from default.
Scope of Claims Management (Duration measured in many years)
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Scope of Claims Management
Claims is either collected, settled, or closed without recovery.
Closure
Litigation / Arbitration typically outsourced to external recovery agencies and / or law firms.
Formal Action
Recovery teams, or external recovery agencies attempt amicable recovery.
External recovery agencies are typically appointed at some stage in this process.
Amicable Recovery Attempts
Claims Management Department, Recovery Teams, and external recovery agencies validate the claim.
Some assistance from external agencies is sought.
Claim Investigation
Claims Management Department analyse claim and check compliance with policy.
External agencies not typically engaged in this process.
Claim Analysis
Debtor no longer covered by insurance policy.
PH faces the risk of uninsured debt arising during this period.
Claim Filing Period
Transactions preceding filing of claim.
Little active involvement of ECA.
Requirement of policyholders to periodically report their sales.
Pre-Claim Default
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Scope of Claims Recovery
Claims is either collected, settled, or closed without recovery.
Closure
Litigation / Arbitration typically outsourced to external recovery agencies and / or law firms.
Formal Action
Recovery teams, or external recovery agencies attempt amicable recovery.
External recovery agencies are typically appointed at some stage in this process.
Amicable Recovery Attempts
Claims Management Department, Recovery Teams, and external recovery agencies validate the claim.
Some assistance from external agencies is sought.
Claim Investigation
Claims Management Department analyse claim and check compliance with policy.
External agencies not typically engaged in this process.
Claim Analysis
Debtor no longer covered by insurance policy.
PH faces the risk of uninsured debt arising during this period.
Claim Filing Period
Transactions preceding filing of claim.
Little active involvement of ECA.
Pre-Claim Default
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CLAIMS MANAGEMENT STRATEGIES General Overview of
Individual Claim Management
Gathering Claim Information Decision
• Determination of claim admissibility / eligibility for indemnification.
• Gathering sufficient evidence of disputes / non-performance to present policyholders.
• Loss Adjusting / adjustment of claim amounts in light of partial disputes / non-performance.
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Claims Portfolio Management
Portfolio Management Policies
Quarterly Management
Reports on all claims we are handling
Claim Management
Claim Manager / Handler
Actions Taken Recommended
Strategy and / or Legal Advice
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Claims Management Challenges
• Policyholder risks and challenges.
– Pre-indemnification challenges.
• Slow or no provision of accurate and timely information, lack of documentation.
• Claim information is passed from the credit control / accounting departments; not the
sales departments.
• Accuracy of claims and eligibility for indemnification (Moral hazard).
– Post-indemnification challenges.
• Slow responses / lack of cooperation (morale hazard).
• Provision of important documents (PoA, original transaction documents).
• Resumption of business / compromising insurer’s position.
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Claims Management Risks
• Lengthy internal procedures delaying recovery activities.
• Statutes of limitations barring formal action against the debtor.
• Non-compliance with formal / procedural requirements in debtors’ jurisdictions.
– Non-compliance with local requirements for debt assignment or subrogation to the
insurer.
– Non-compliance with local requirements for noting / protestation of bills of exchange.
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RECOVERY STRATEGIES General overview.
Evolution in Trade & Investment Landscapes
Traditional Landscape
• Localized businesses.
• Homogeneous / local culture.
• Immobile and attached to local
resources.
• Limited number of chances to re-
start business.
New Landscape
• Globally integrated.
• Multi-cultured.
• Highly mobile with access to
multiple streams of resources.
• Unlimited number of chances to re-
start business.
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Evolution of Recovery Strategies
Traditional Approach
• Follow strict procedures and timelines.
– Dunning letters & reminders.
• Threats of legal action.
• Little to no regard for reasons for non-payment.
• “All or nothing” / single solution approach.
• Recovery activities are part of the debtor’s problems.
New Approach
• Follow strict timelines but with malleable procedures.
• Introduces legal action as a possible outcome.
• Primary interest in reasons for non-payment.
• Exploring multiple feasible solutions.
• Recovery activities are part of the debtor’s solution.
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AMICABLE RECOVERY
The Debtor – Friend or Foe?
• The debtor’s cooperation is critical for successful amicable recovery.
• The dynamic between the collector and the debtor is the key determinant of success.
• Solution orientation is key to successful amicable recovery.
• Win-win outcomes are generally possible.
• Clear communication to debtors about the benefits of cooperating is required.
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Priorities & Solutions During Amicable Recovery
• Debt restructuring.
– For short-term transaction, restructuring is generally from short-term unsecured debt to
medium-term debt.
– Collateralization.
– Repayment plans.
• Legal restructuring.
– Change of creditors from policyholder to insurer.
– Change of jurisdiction.
– Seeking joint or separate guarantors.
• Controlled resumption of business with the policyholder with debt recycling as an option.
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Important Considerations for Amicable Recovery
• Frequent and regular face-to-face visits to debtors.
• Close monitoring of debtors’ industry, and country risk.
• Close monitoring of debtors’ activities, registration renewals, etc.
• Clear and open communication with the debtor to ensure compliance with restructured
agreements.
• Familiarity with local statutes (esp. statutes of limitation) to evaluate our position.
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FORMAL ACTION Overview of
“A bad settlement is better than a good court case”
• Formal action is always a last resort.
• Formal action is a pressure mechanism and not a means to an end.
• Formal action is expensive, unpredictable, and not always enforceable.
• All parties lose control during formal action.
• Communication and settlement attempts must continue.
• Settle (if possible) at the earliest reasonable opportunity.
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Formal Action Landscape
Litigation
National Laws Int. & Regional
Conventions
Arbitration
1958 NYC Lex Loci Arbitri (National Arb.
Laws) ICSID BIT
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NATIONAL COURTS Litigation in the Iran & the Arab World
Procedures Available in Most National Courts
• The commercial legislations in Iran as well as most Arab jurisdictions are
comparable.
• Three stage court systems are present in most (but not all) jurisdictions.
• The following procedures are generally available.
– Prejudgment attachments, injunctions / summary proceedings.
– Bankruptcy procedures exist and occasionally effective.
– Enforcement procedures are managed and implemented through independent departments /
courts.
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Specialised Provisions of Law, Procedures, & Regulations
• Laws concerning commercial papers.
– Bank cheques.
– Bills of Exchange in national laws and UN Convention.
• Retention of Title clauses and relevant provisions in national laws.
• Recognition and application of standardized international contract types in
national laws (INCOTERMS).
• Application of banking standards (UCP 600 / URC 522).
31
Statutes of Limitations (General Commercial Claims) Jurisdiction Duration from Due Date Statues Algeria 15 Years Civil Law Undefined in Commercial Law, resort to Civil Law.
Bahrain 10 Years Art. 87 Commercial Law No. 7 of 1987
Egypt 7 Years Art. 68 Commercial Law No. 17 of 1999
Jordan 10 Years Art. 58 Commercial Law 1999
Iran Indefinite. Statutes of limitations are not applied.
Kuwait 10 Years Art. 118 Commercial Law No. 68 of 1980
Lebanon 10 Years Art. 262 Decree 304 of 1942 Re. General Commerce & Companies.
Libya 15 Years Civil Law Undefined in Commercial Law, resort to Civil Law.
Morocco 5 Years Art. 5 Commercial Law
Oman 10 Years Art. 92 Commercial Law 55 of 1990
Qatar 10 Years Art. 87 Commercial Law No. 27 of 2006
Saudi Arabia Indefinite Recent developments towards civil law introduced some time limitations.
Syria 10 Years Art. 115.1 Law No. 33 of 2007 - Commercial Law
Tunisia 15 Years Undefined in Com. Law resort to Art. 402 Obligations and Contracts Gazette
UAE 10 Years Art. 95 Commercial Transactions Law No. 18 of 1993
[1] Egypt is a signatory of the UNCITRAL 1974 Convention on the Limitation Period in the International Sale of Goods. Little precedence is found where use of this convention was made, however it is worth noting that it can limit the period to four years under certain circumstances.
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Other Relevant Statutes of Limitations
• Actions to enforce Commercial Papers is mostly barred at 3 years from due date.
• Actions related to quality / performance claims are mostly barred at 6 months from delivery or
presumed knowledge.
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TREATIES & CONVENTIONS
34
UNCITRAL CISG (Vienna Convention)
Member Countries
Bahrain
Egypt
Iraq
Lebanon
Mauritania
Turkey
35
Arab Convention on Judicial Cooperation
(Riyadh Convention 1983)
Member Countries
Iraq
Yemen
Sudan
Mauritania
Syria
Somalia
Tunis
Jordan
Morocco
Libya
UAE
Oman
Bahrain
Saudi Arabia
Algeria
Palestine 36
Hague Convention 1979
Member Countries
Kuwait
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INTERNATIONAL COMMERCIAL ARBITRATION Recognition and Enforcement of Foreign Arbitral Awards in Iran & Arab Countries
International Commercial Arbitration in the Arab World
• Domestic and International Arbitration are effective in Iran and Arab Countries.
• International Commercial Arbitration with sovereign entities (ministries, some government
owned companies) require special authorization in Syria, Saudi Arabia, and Iran.
• Good planning and preparation for the enforcement of default awards is required.
• Many respondents prefer not to participate in the arbitration resulting in default awards.
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Arbitral Award
Recognition Proceedings
Enforceable ruling
• Direct enforcement of domestic or foreign
arbitral awards is not possible in Iran or any
Arab country.
• Substantive requirements for recognition of
foreign awards are regulated by the 1958 NY
Convention in Iran and most Arab countries.
• Procedural requirements for recognition of
1958 NYC awards are regulated by domestic
procedural laws.
• Variation of recognition procedures exists in
Iran and Arab Countries.
• Only six countries have adopted the
UNCITRAL Model Arbitration Law.
Recognition & Enforcement of Arbitral Awards
40
1958 NY Convention Countries
Member Countries
Bahrain*
Egypt*
Tunisia*
Saudi Arabia*
Oman*
Jordan*
Morocco
Lebanon
Qatar
Kuwait
Mauritania
Algeria
Syria
UAE
41
Arab Convention on Commercial Arbitration
(Amman Convention 1987)
Member Countries
Jordan
Tunisia
Algeria
Djibouti
Sudan
Syria
Iraq
Palestine
Lebanon
Libya
Morocco
Mauritania
Yemen
42
Challenges Related to International Commercial Arbitration
• National courts relatively hostile / uncooperative with arbitration.
– A number of high profile negative court decisions impacted credibility in the effectiveness of arbitration in the region.
• Length of ratification procedures is comparable to litigating substantive claims.
– Speed as a key benefit to arbitration is negatively impacted.
• Relatively large amount of defective arbitration agreements.
• Procedural errors increasing the risk of successful challenge to awards.
43
SOVEREIGN DEBT & INVESTMENT CLAIMS RECOVERY
Investment Dispute Resolution – Medium Term Claims Recovery
Investment Claims
• Investment claims benefit from a wider set of national legislations and
international treaties that offer better protection.
• The nature of the transaction determines whether it is an “investment”
transaction.
– Movable or immovable property.
– Rights to returns from investments in financial instruments or loans.
– Intellectual property rights.
– …etc.
• Investment transactions are not necessarily large in monetary value,
• Investment transactions tend to be medium to long term (2+ yrs.).
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Sovereign Liability or Debt
• Claims against a sovereign can arise through direct or indirect transactions
between the insured and the sovereign.
• Direct transactions entail direct supplies to sovereign buyers (including
sovereign controlled corporations) .
• Sovereign liability is more likely to arise out of sovereign guarantees, or
breaches / changes in the investment environment.
46
Investment Dispute Resolution
• Various conventions, bilateral / multilateral investment treaties, and national investment
promotion laws offer dispute resolution mechanism.
• Arbitration and national courts are generally available for dispute resolution.
• The type of investment determines the jurisdiction and applicable treaties.
• International Center for the Settlement of Investment Disputes (Washington Convention
1965) and Multilateral Investment Guarantee Agency are World Bank initiates to promote
investments and settle associated disputes.
• Non-compliance with ICSID awards is a breach of a World Bank mandate.
47
1965 Washington Convention (ICSID)
Member Countries
Bahrain
Egypt
Tunisia
Saudi Arabia
Oman
Jordan
Morocco
Lebanon
Qatar
Kuwait
Mauritania
Algeria
Syria
UAE
Sudan
Somalia
Yemen 48
CONCLUSION & RECOMMENDATIONS
Recommendations for Claims Management
• Ensure that you and the policyholder comply with formal requirements :
– Protesting / noting bills of exchange.
– Proper serving of notices of assignment.
• Gather all transaction documents and a power of attorney from the policyholder before
indemnification.
• Take note key statutes of limitations and ensure that time is carefully managed.
50
Recommendation for Claims Recovery
• Recommendations for amicable recovery.
– Establish face-to-face contact with the debtor as fast as possible.
– Work towards win-win solutions.
– Closely monitor the debtor’s industry and their individual situation.
• Recommendations for formal recovery.
– Carefully explore applicable judicial cooperation conventions or investment treaties; often
they are more efficient than national laws.
– Carefully plan for enforcement before commencing any formal action.
– Consider formal recovery as a last resort.
– Maintain contact with the debtor during formal recovery.
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