FACTORING AND CREDIT INSURANCE COMPETITORS OR COMPLEMENTS Dominique CHARPENTIER WARSAW, October 24th 2003

CONTENT INTRODUCTION: THE ORIGINS FACTORING AND CREDIT INSURANCE AS COMPETITORS FROM A STATIC ANALYSIS FROM A DYNAMIC ANALYSIS FACTORING AND CREDIT INSURANCE AS COMPLEMENTS TO EACH OTHER BUSINESS RELATIONS BETWEEN BOTH ACTIVITIES COMBINED PRODUCTS CONCLUSION: TOWARDS A GLOBAL RECEIVABLES MANAGEMENT CONCEPT

INTRODUCTION THE ORIGINS Kapitel INTRODUCTION THE ORIGINS CREDIT INSURANCE: From the early years of 20th century To make the domestic commercial transactions more secure Government schemes to boost exports FACTORING: In the 60ies To give access to financing sources to companies unable to use the classical bank sources Gerling Gesellschaft/Abteilung

FACTORING AND CREDIT INSURANCE AS COMPETITORS FROM A STATIC ANALYSIS Kapitel FACTORING AND CREDIT INSURANCE AS COMPETITORS FROM A STATIC ANALYSIS CREDIT INSURANCE: A BLEND OF 3 SERVICES INFORMATION COVERAGE AND INDEMNIFICATION RECOVERY FACTORING: A BUNDLED OFFER OF SERVICES FINANCING COVERAGE PURCHASE WITHOUT RECOURSE RECEIVABLES MANAGEMENT ACCOUNTING OUTSOURCING DUNNING, COLLECTION, PAYMENTS ALLOCATION, RECOVERY OVERLAPPING AREAS OF SERVICES

FACTORING AND CREDIT INSURANCE AS COMPETITORS FROM A DYNAMIC ANALYSIS CREDIT INSURERS ADD VALUE TO THEIR BASIC PRODUCT TOWARDS (INDIRECT) FINANCING VIA LINKS WITH BANKS: THE CERIP PRODUCT OF EULER SFAC AND COFACE IN FRANCE LINKS TO SECURITISATION: EUREFIN PRODUCT OF GERLING NCM TOWARDS FULL COLLECTION SERVICE FROM RECOVERY TO COLLECTION IT TOOLS TO MANAGE CREDIT INSURANCE POLICY INTERIM CREDIT MANAGEMENT FACTORS UNBUNDLE THEIR PRODUCT NON MANAGED FACTORING HOME FACTORING INVOICE DISCOUNTING MATURITY FACTORING BOTH SECTORS TO SERVE THE SAME BUSINESS NEEDS

FACTORING AND CREDIT INSURANCE AS COMPLEMENTS BUSINESS RELATIONS MOST FACTORS RELY ON CREDIT INSURANCE POLICY FOR ALL OR PART OF THEIR RECEIVABLES FROM A WHOLE TURNOVER OR AN EXCESS APPROACH SUBCONTRACTING THE BUYER RISK MANAGEMENT ALL 3 BIGGEST CREDIT INSURERS HAVE THEIR OWN FACTORING ORGANISATION (S) EULER-HERMES: EUROFACTOR GERLING NCM FACTORING ORGANISATION COFACE: COFACREDIT IN FRANCE LINK TO FACTOREM AK FINANZ IN GERMANY

FACTORING AND CREDIT INSURANCE AS COMPLEMENTS COMBINED PRODUCTS ADVANCED DELEGATION FACTORING CONTRACTS DELEGATION CONTRACTS ARE USUAL IN FACTORING, BUT USUAL C/I LIMITS TO INDEMNIFICATION RECEIVABLES GIVEN BACK TO THE SELLER IN CASE OF NON PAYMENT ADVANCED DELEGATION CONTRACT (CONCERTO PRODUCT OF GERLING NCM) 100% INDEMNIFICATION MAINTAINED FINANCING UNTIL INDEMNIFICATION ONE SHOT FACTORING OPEN OPTION TO POLICY HOLDER WITHIN THE WHOLE INSURED TURNOVER (AVOID ANTI-SELECTION) ONE OPERATION FACTORING CREDIT INSURANCE POLICY ADMINISTRATION FACTOR USUALLY HANDLES THE SELLER’S C/I POLICY OPEN THIS SERVICE TO NON FACTORED INSURED COMPANIES

CONCLUSION CONVERGENCE IS NOT OPPOSING FACTORING AND CREDIT INSURANCE TO EACH OTHER CONVERGENCE IS CREATING A GLOBAL CONCEPT OF RECEIVABLES MANAGEMENT A TOOL BOX TO ADAPT THE OFFER THE THE SPECIFIC NEEDS OF EACH COMPANY