Highland Fuels & Bondaval shortlisted for Chartered Institute of Credit Management award
Highland Fuels and Bondaval have been shortlisted as one of the top risk management initiatives in the UK at the British Credit Awards. These are the national awards for the Chartered Institute of Credit Management, the industry body for the UK representing best practice in credit management.
In their programme, Highland Fuels worked with Attis Credit Solutions and Bondaval to replace their existing trade credit insurance policy with Bondaval MicroBonds: on-demand, digitally issued surety bonds. This demonstrates an entirely new application of an insurance product, representing a fundamental shift in how companies can approach the securing of their receivables.
Moving away from a trade credit insurance policy that they had held for 15 years, Highland Fuels adopted Bondaval’s proprietary instrument, MicroBonds, to protect their balance sheet.
With the business pursuing ambitious growth, the Highland Fuels credit team required a more responsive, reliable means of protecting receivables, so that they could facilitate expansion without exposing the company to undue risk.
With the support of Attis Credit Solutions, a specialist credit insurance brokerage, Highland Fuels chose to work with Bondaval, replacing their traditional trade credit insurance policy.
We had become so familiar with the concept of trade credit insurance for so long that by changing to using MicroBonds we moved over to a totally new way of thinking. But we’re happy we took the leap. It’s been a complete win-win.
Unlike traditional trade credit insurance, MicroBonds offer 100% indemnity, are non-cancellable, and claims must be paid within 5 days. They can be purchased and tracked through the Bondaval platform, radically reducing the time required to manage, renew and change coverage. There is also no conditionality; once the MicroBond has been issued, cover is fixed for the length of its term (typically 12 months), and payment in the case of default is assured.
This is possible because all underwriting for MicroBonds is done upfront by Bondaval’s automated risk assessment algorithm, which is developed via edge-cutting machine learning approaches. The machine learning process identifies patterns in the data that correspond with risk and predicts the future risk level for each of Highland Fuels’ customers. Data is sourced from a variety of inputs, including transaction history via Open Banking, third-party credit data and financial accounts.
And unlike traditional collateral-based instruments, there is full transparency over the process of purchasing and managing a MicroBond. Each bond has an in-built audit trail of documents, interactions and requests between Bondaval’s underwriting team and the credit team at Highland Fuels, captured in a straightforward timeline. This makes it far simpler for the Highland team to get full visibility over the level of cover they have for each of their customers, instead of chasing for information.
On top of this, the digital-first nature of this solutions allows Bondaval to better match Highland Fuels’ ways of working, and so avoid gaps in coverage caused by operational issues. Changes to limits can be requested directly in the platform, and approvals or requests for further information will arrive directly from the Bondaval underwriting team, usually on the same day.
With this change, Highland Fuels have also protected the quality of their security. Bondaval is a managing general agent, underwriting and issuing policies on behalf of an A+ rated insurer, Arch Insurance, a wholly owned subsidiary of Arch Capital Group, a $19 billion, NASDAQ-listed entity.
One of the best things for us has been the speed. Bondaval’s platform is fast, simple to use, and it’s helped create a far more streamlined process with sales.
By using MicroBonds to protect receivables instead of trade credit insurance, Highland Fuels can:
1) Reduce unplanned exposure through cancelled coverage. An issue Highland commonly faced with their previous provider was the intermittent pulling of cover. This would leave them exposed on some customers with little to no warning. Often, cover was pulled with no reason given, leaving Highland’s credit team to do the legwork to find out whether they could renew cover by supplying more information, or whether they would need to escalate the exposure to the managing director for approval.
With MicroBonds, coverage is non-cancellable, meaning that once a bond is issued, the Highland team have the certainty that they are covered. They no longer have to worry about a cancelled policy exposing them to risk and derailing their day.
2) Access more comprehensive balance sheet protection. Because all underwriting for MicroBonds happens at the point of purchase, meaning that once a claim is made, there is no remaining assessment required to make the payment. In the case of a claim, therefore, Bondaval can pay promptly, and is in fact contractually obliged to pay Highland Fuels within 5 days of the claim being made.
This reduces the amount of time for which Highland’s balance sheet would be affected following a loss, as well as cutting any extra administrative cost incurred by going through an insurer’s loss adjustment process.
3) Expand coverage quickly. Where an account with a customer is growing, Highland is now able to accept their increasing orders far more quickly. Previously, the turnaround time from Highland’s former insurer was slow and inconsistent; now, Highland is able to request changes to limits within the Bondaval platform, and typically hears back within 24 hours.
This has resulted in a more streamlined sales process with fewer gaps in coverage. Now, the team at Highland Fuels does not have to choose between delaying the sale until the insurer confirms coverage, or going ahead with exposure. Relations with the sales department have become more harmonious and, together, the credit and sales teams can deliver safe long-term growth for Highland Fuels.