On 10 August 2022, the Loan Market Association ("LMA"), in association with Lloyd's Market Association ("Lloyd's") and the International Underwriting Association ("IUA"), published a model form of credit risk insurance policy ("CRI Policy").

The CRI Policy represents the culmination of two years' work of a working party consisting of credit insurance market stakeholders, including law firms, banks, brokers, insurers, Lloyd's and the IUA.

As explained in the LMA's user guide relating to the CRI Policy, it has been drafted:

  1. on the basis that it may be used as unfunded credit protection for regulatory capital, as well as for other prudential regulatory purposes;
  2. with regard to the requirements for unfunded credit risk protection pursuant to the CRR1;
  3. for the purposes of insuring a single borrower risk under a loan agreement, whether or not secured; and
  4. as a basic starting point for a policy of its type, subject to case specific customisation and subsequent negotiation (in other words the CRI Policy will not, without customisation, necessarily be suitable for a particular transaction or provide the requisite protection).

Why is the CRI Policy so important?

As the first insurance policy document produced by the LMA, the CRI Policy is a significant development, and a landmark achievement, for the credit insurance market; it represents an important step towards achieving a well understood, standardised form of documentation for a widely used credit risk mitigation tool.  The fact that the CRI Policy was published by the LMA, a trusted industry body, to which many banks look to provide template documentation, together with a working group comprised of all major stakeholders in the credit insurance industry affords the document credibility as a reasonable and even-handed starting point for negotiations, which should reflect standard market positions.

In addition, market commentators have also noted that the CRI Policy will help to evidence a level of standardisation of core terms to banking regulators, which has been a key regulatory concern in the industry.

Finally, and as mentioned in the LMA press release relating to the CRI Policy, the CRI Policy should provide a recognisable framework and boilerplate to achieve greater efficiencies and standardisation across the industry (particularly for new entrants), which in turn allows market participants to focus on the commercial drivers rather than the form of documentation.


The CRI Policy is not, of course, a substitute for expert advice in a sophisticated product area (and nor does it claim to be); all users will need to confirm for themselves whether a credit risk insurance policy (whether based on the CRI Policy or otherwise) satisfies applicable regulatory requirements (whether in respect of CRR or otherwise).  Similarly (and as also highlighted by the LMA press release) the CRI Policy is not intended to be a substitute for, or to override, terms already negotiated between, and agreed by, specific insured lenders and their insurers; it would be ineffective as a "one size fits all" document. These factors do not constitute shortcomings with the CRI Policy; it is, however, important to acknowledge – as the CRI Policy does – what a model form of this kind is intended to achieve. As the LMA's user guide relating to the CRI Policy aptly puts it, "the model form is intended to form the basis of a sensible first draft for the subsequent negotiation of a basic credit risk insurance policy". In other words, there is now something helpful and market credible on the page to start with, but it will require transaction specific customisation.

If the market adopts the recommended form as a starting point, this could help with CRR requirements such as Article 213(1)(b), which requires that credit risk mitigation be “clearly defined and incontrovertible” and Article 213(1)(c), which requires that "the credit protection contract does not contain any clause, the fulfilment of which is outside the direct control of the lender". However, (a) we expect many brokers and insurers to continue to prefer to use their own standard form policies rather than this LMA document, at least initially, and (b) the LMA recommended form may not help with some of the thorniest of issues in this area, such as the fact that the CRR requires a lender to be able to claim directly under the credit risk management product, whereas in many syndicated loans, it is the security agent who is named as an insured party rather than each lender.

The UK financial regulators have not officially endorsed the recommended from as a means of satisfying the requirements under CRR. However they take account of industry guidance in their decision making and may treat policies which follow the model as more likely to be compliant with the requirements and policies which are materially different as less likely to be compliant.

Perhaps more importantly, the recommended form might help the insurance industry to settle its thinking on what an acceptable wording looks like and that may promote the availability of CRR compliant policies within the market.

For more information on the CRI Policy, please speak to your usual Mayer Brown contact.

"CRR" means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, including as it forms part of the domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018.