Rights to separate satisfaction play a major role in insolvency proceedings. They are based on a security interest granted before insolvency. The right to separate satisfaction entitles creditors with such a right to be satisfied ahead of all other creditors from the proceeds of selling a separate pool of assets within the insolvent estate.
The right to separate satisfaction must be asserted during the insolvency proceedings, just as all receivables must be registered. Sale of the separate pool of assets is performed by the insolvency administrator.
The following forms of security interest provide entitlement to separate satisfaction: pledge, retention of title expanded by a “manufacturing and processing clause” or “processing and commingling clause”, extended retention of title, assignment by way of security.
According to the European Commission, marketable risks are commercial and political risks associated with short-term export credits within the European Union and the Member States of the OECD that have a maximum risk period of less than two years.
Non-marketable risks are, for example, any export transactions to countries outside the EU and the OECD, as well as to South Korea, Turkey and Mexico.
Political risks refer to war, civil war, strikes, internal unrest, uprisings, embargoes, blockades, lockouts, confiscation, state interventions, payment bans, moratorium risks, conversion risks, transfer risks and boycotts. Political risks are excluded from the insurance cover.
Disaster risk includes, for example, earthquakes, flooding and occurrences such as major fires. Disaster risks are excluded from the insurance cover.
Commercial risk covers the inability to pay or payment default of a customer of the policy holder.
Insurance cover for the commercial risk begins upon delivery of the goods or commencement of the services. The pre-shipment risk covers the costs that the policy holder incurs owing to the production of goods prior to delivery based on orders that have already been placed. Extra cover may be taken out with the insurer to cover such costs.
The policy holder shares the costs of each insured loss in the form of a self-insured retention. The self-insured retention may not be insured in any other form. The self-insured retention is specified in the insurance policy. The credit limit notification may specify a higher self-insured retention.