Securing Bank Claims by means of Credit Risk Insurance versus Insurance Recourse

Abstract

This article examines the specific nature of the insurance of risks directly related to lending. The dynamic development of cooperation between banking and insurance industries has resulted not only in a greater popularity of the coverages already existing on the market, but also in new types of insurance products directly linked to banking operations and covering risks that were traditionally non-transferable to insurance undertakings. Further comments refer to the functions of insurance recourse in relations with banks. However, the main focus of this study is the confrontation of results of those analyses with the phenomenon of directing recourse claims to the entities carrying the actual and final burden of the insurance cost (borrowers). Moreover, practical solutions adopted by credit institutions which involve the treatment of credit risk insurances as payment protection methods and consequently shift the burden of insurance premium onto the borrower have been assessed.