CAP Frequently Asked Questions

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1 CAP Frequently Asked Questions Introduction What is CAP? CAP is a credit insurance product that can be endorsed to your existing Euler Hermes (EH) policy, enabling you to purchase additional coverage on credit limits that have been fully or partially declined. Why CAP? We understand that sometimes you have a need for coverage on higher risk buyers or those buyers for which limited information is available. With CAP, you have the freedom to make strategic trading decisions on riskier transactions. The introduction of CAP will not alter our primary goal of offering the most coverage available under your existing policy. How can CAP benefit me? Opportunity- take advantage of higher risk sales opportunities. Protection- avoid the potential loss of taking on higher risks yourself. Convenience- consolidate your excess and primary coverage under one trusted carrier. Simplicity- get a transparent pricing structure and easy coverage requests via EOLIS. Flexibility- obtain limits that are available for a minimum of 3 months, or as long as you need them. What are the different types of CAP limits? CAP Limit: For partially approved limits, coverage matches your existing credit limit up to $1.5 million. Who is eligible for CAP? CAP+ Limit: For declined limits, coverage is available up to $75,000. CAP is eligible for most Euler Hermes policyholders. Ask your representative for specific details. Get Started Today. Contact your representative, CAP@eulerhermes.com or visit Euler Hermes North America Insurance Company 800 Red Brook Blvd, Owings Mills, MD

2 Coverage How are CAP terms different from my existing policy? CAP will be endorsed to your existing eligible Euler Hermes credit insurance policy. Terms under CAP will mirror your existing policy except where explicitly stated otherwise in the CAP endorsement wording. A few major exceptions are: Policy deductible (or AFL) and loss ratio calculations do not apply to claims on CAP or CAP+ limits. CAP limits only incur a one-time $25 limit fee on approvals only, rather than an annual $50 or $5 fee. Delayed effect of cancellation and construed coverage endorsements are Delayed not applicable effect of cancellation to CAP+ limits. and construed coverage endorsements are not applicable to CAP+ limits. What markets are covered under CAP? Both domestic and export coverage are available, except for certain high-risk excluded markets. What levels of coverage are available under CAP? Type of CAP Limit Maximum amount eligible to apply Restrictions CAP Where an approved limit is present under your existing policy but is insufficient for your requirements (a partially approved limit). Please note A CAP limit is not available where the existing policy limit is a Discretionary limit, Temporary limit, or EZ Cover limit. CAP The lesser of: $1.5M; or Up to a 100% match of your existing limit CAP coverage will not be granted if: The buyer on the existing policy is already past due according to the terms of the policy (typically $10K over 60 days past due). Cover on any buyer is always conditional upon EH issuance of a limit endorsement under CAP. CAP+ Where there is no limit under your existing policy (full declines). Please note A CAP+ limit is not available where the existing policy limit is a Discretionary limit, EZ Cover limit or any value other than full decline. CAP+ Up to $75,000 CAP+ coverage will not be granted if: The buyer is already past due according to the terms of the policy (typically $10K over 60 days past due). Credit limits on the buyer have been cancelled in the past 6 months (including any delayed effect notice of withdrawal EH has issued). Any open claims or collections filings against the buyer are present. Any form of formal insolvency proceeding against the buyer is present. Cover on any buyer is always conditional upon EH issuance of a limit endorsement under CAP+. 1

3 Coverage (continued) What are some examples of CAP? Example 1 CAP Example 2 CAP Example 3 CAP+ $200,000 Total Cover $4,000,000 Total Cover $75,000 Total Cover $100,000 EH existing Limit $100,000 Cap Limit $2,500,000 EH existing Limit $1,500,000 Cap Limit $0 EH existing Limit $75,000 Cap+ Limit You hold a $100,000 existing limit under your existing policy and the buyer is free of the previously listed restrictions. You are eligible for up to a maximum of $100,000 under your CAP endorsement giving a total combined cover of $200,000. You hold a $2,500,000 existing limit under your existing policy and the buyer is free of the previously listed restrictions. You are eligible for up to a maximum of $1,500,000 under your CAP endorsement giving a total combined cover of $4,000,000. You hold no limit under your existing policy and the buyer is free of the previously listed restrictions. You are eligible for up to $75,000 under your CAP+ endorsement. What is the process of adding a CAP endorsement to my existing policy? You request that the endorsement be added by reaching out to your representative or ing CAP@eulerhermes.com. There is no additional cost for this endorsement. How do I apply for a CAP limit? Once you receive your CAP endorsement and the CAP reference number, applying for a CAP limit is done the same way that you do today, except all CAP limits must be entered under your CAP reference number in EOLIS, not your existing policy number. Once a CAP limit request is entered in EOLIS, we will simply check the requested amount against your existing policy buyer limit and, if eligible, approve the CAP limit request. How do I view my list of CAP limits? The CAP limits will look exactly the same as your existing policy credit limits just issued with the new CAP reference number. You will be able to access your CAP Limits at any time via EOLIS. When you are submitting or altering coverage, select the CAP reference number instead of the existing policy number in EOLIS. Will CAP coverage be automatically issued if EH declines, reduces or partially approves a limit? No. CAP coverage will not be issued automatically when there is a shortfall of coverage under your existing policy limit. How does CAP affect coverage under my existing policy? CAP will have no effect on coverage available to you under your existing policy. Our primary goal is to always offer the most coverage available under your existing policy. How long are CAP limits valid for? CAP limits are written as permanent limits, but are subject to a 3 month minimum premium period (for more details see Premium and Invoicing section). When does my coverage begin under a CAP limit? A CAP limit is retroactive for deliveries/services provided, as defined by the terms and conditions of your CAP endorsement. A CAP+ limit covers deliveries/services provided on the date of the CAP+ limit endorsement approval. When should I apply for a CAP limit? You should apply once all efforts to obtain coverage on your existing policy have been exhausted. You can apply for coverage under your CAP reference number whenever you wish and the decision to apply will always be at your discretion. 2

4 Coverage (continued) What happens to my CAP limit if my existing policy credit limit increases? EH will always attempt to make you aware when increased coverage becomes available under your existing policy if you have a CAP limit on that buyer. If the existing policy limit does increase the following will apply: CAP Limit If you no longer require the cover you can cancel it (or if you are within the minimum premium period, please request that EH cancel coverage on your behalf to override the minimum premium period). CAP+ Limit If a positive credit limit is subsequently approved under the existing policy you can cancel the CAP+ limit (or if you are within the minimum premium period, you should request that EH cancel coverage on your behalf to override the minimum premium period). Alternatively, if you wish to retain the additional coverage you can request that EH re-endorse the limit as a CAP limit (since CAP+ is no longer needed) at the lower premium rate (up to a 100% match of your existing limit). What happens to my CAP limit if my existing policy limit is reduced or canceled? CAP Limit If your existing limit reduces to a level below the CAP limit the CAP limit will automatically reduce or cancel to the level of the existing limit. If you have made this reduction, minimum premium will still apply on the basis of the full original CAP limit for any remaining months of the minimum premium period. If EH has made this reduction, you will only be charged on the basis of the highest limit held in any given month regardless of any minimum premium period. CAP+ Limit N/A No cover is held under the existing policy for a CAP+ limit. How will I manage cancellation or reduction of CAP limits I no longer require? Exactly the same way you would under your existing policy, through EOLIS. Select the CAP reference number to view CAP limits in EOLIS. EH would recommend you routinely review this list at the end of each month and cancel any unwanted coverage. If you know coverage is only required for a certain period and want to be certain that the limit expires on the last day of the minimum premium period (e.g. to avoid incurring a further month s premium), then you can request that we endorse a pre-determined end date to the limit. This will result in an automatic lapse of the limit on that date. This request should be made in the comments field of the limit request in EOLIS. Premium and Invoicing What is the cost of CAP cover? Rate Annualized Premium Rates CAP 2% per year (or 0.167% per month) of the value of the limit Will I be billed for CAP credit limit requests? CAP+ 6% per year (or 0.5% per month) of the value of the limit Yes, but it is only a one time $25 fee on approved limits regardless of whether it is for a domestic or export buyer and is incurred only once for the life of that limit. Will the price vary for CAP coverage in different countries? No. These rates are the same regardless of which country is covered under the CAP limit. Why is the price higher than my existing credit insurance rate? CAP takes on risks that we have declined to cover following established risk assessment practices. The product is providing coverage against restricted or declined limits and the pricing structure is based on covering those higher risk buyers. CAP rates are based on the amount of coverage requested, whereas the existing policy rate generally applies to insured sales. Finally, the rates specified are annualized. Minimum premium equates to only one quarter of the annualized rate which is a quarterly rate of 0.5% for CAP and 1.5% for CAP+. 3

5 Premium and Invoicing (continued) Are CAP rates negotiable? CAP rates are not negotiable and there are no volume discounts. These rates are applicable for all CAP and CAP+ buyer limits regardless of whether the cover is domestic or export. How does CAP coverage change my final sales reporting requirements? For CAP limits, it doesn t. You must continue to report all insured buyers under your existing policy the same way you do now. For CAP+ limits, sales would not be reported on the final sales report as it is not an insured limit under your existing policy. Is there a minimum premium period? Yes, there is a minimum requirement per buyer of 3 months premium. This equates to an effective minimum rate of 0.5% for CAP limits and 1.5% for CAP+ limits. Once the minimum premium period is completed you will only be committed to paying monthly premium based on the highest limit held during that month. The month in which the limit is approved will count as your first full month of cover for invoicing and minimum premium purposes. Keep this in mind when applying late in the month. How will premium be calculated if coverage changes during the minimum premium period? If you cancel the limit You will continue to be invoiced for the limit for the full 3 months. If EH cancels the limit You will only pay premium for any month in which you held coverage at any point in that month. If the limit increases The monthly premium for any remaining months of the existing minimum premium period will be based on the new higher limit (i.e., this will not create a new 3 month minimum period but will affect the amount you pay for the remaining months of the existing period). Minimum Premium Examples Initial Coverage Example 1 Example 2 Example 3 $100,000 CAP limit endorsed on June 20 Action Taken You cancel or reduce the limit on July 10 EH cancels the limit on July 10 $100,000 CAP limit endorsed on June 20 $100,000 CAP limit endorsed on June 20 You request an increase and EH approves, raising the limit to $150,000 on July 10 You reduce the coverage back to 100,000 on July 30. Premium Due Monthly premium of $100,000 x 2% will be due for June, July and August. Premium due in September will be based on the reduced or cancelled amount, as minimum premium has been fulfilled. Monthly premium of $100,000 x 2% will be due for June and July. No further premium will be due in August as the limit was cancelled by EH and no cover was held in August. Monthly premium of will be due for June. Monthly premium of will be due for July. Monthly premium of will be due for August. $100,000 x 2% $150,000 x 2% $100,000 x 2% How will I be invoiced? Invoicing will be monthly and based on the highest limit value held at any point during that month (regardless of your sales). The monthly calculation will be 1/th of the annualized rate, for example: How will I know what coverage I have been invoiced for? At the end of each month, EH will provide you with a detailed line statement listing for each CAP buyer limit you have been invoiced for that month. This statement will be issued along with your monthly invoice. Buyer A ($50,000 CAP Limit x 2%) = $83.33 Buyer B ($50,000 CAP+ Limit x 6%) = $

6 Claims and Recoveries How should past due reporting be completed for CAP limits? The past due reporting parameters remain the same as the existing policy (typically $10k over 60 days past due). For CAP limits, a past due report only needs to be completed on the existing policy for the full amount past due. For CAP+ limits, the past due report should be completed under the CAP reference number in EOLIS as the existing policy has no limit for that buyer. How will I submit a claim that has CAP coverage? The same way you do today. File the full claim amount under your existing policy in EOLIS for all CAP and CAP+ claims. How will a CAP claim be assessed across your existing policy and CAP endorsement? In summary the process is as follows: An existing policy and CAP claim: You will file the entire amount owed without specifically identifying the existing policy and CAP limits. EH will assess the claim to determine the applicable coverage that attaches to the existing claim amount (amount of Total Insured Debt within the existing limit) and the CAP claim amount (amount of Total Insured Debt in excess of the existing, but not to exceed the CAP credit limit). Since there is only one claim filing placed for the total indebtedness owed, which includes the existing and CAP exposure, EH will proceed with the loss settlement within the prescribed time frame as outlined in the policy as follows: EH will apply the credit limit applicable to the existing claim amount, which is subject to all terms and conditions of the existing policy (less Per Buyer Coinsurance/Uninsured percentage, Each and Every First Loss/Per Buyer Deductible and Aggregate First Loss/Policy Deductible). EH will apply the limit applicable to the CAP claim amount, which is subject to all terms and conditions of the existing policy and CAP Endorsement (less Per Buyer Coinsurance/Uninsured percentage, Each and Every First Loss/Per Buyer Deductible). The net sum of the total loss due on the existing claim amount and the CAP limit will be paid to the insured. CAP+ Claim: The CAP+ claim will only involve a claim under the CAP endorsement, which will be settled under the existing policy where the CAP endorsement attaches. Will claims paid under CAP affect my loss ratio and future rate calculation? No. Any losses incurred under CAP do not count towards the loss ratio of your existing policy. How will claims be paid and salvage apportioned between the existing policy, the CAP endorsement and my company? As per the existing policy any salvage recoveries will be shared between the interested parties in accordance with their share of the debt. Example 1a: Total debt is less than combined coverage; where Existing limit: $200,000 CAP Limit: $200,000 Total Debt: $350,000 Existing Policy CAP Endorsement Total Debt $350,000 Total Debt $350,000 Existing Limit $200,000 Less Existing Limit ($200,000) = $150,000 Existing Limit Claim Amount $200,000 Additional Claim Amount $150, % Coinsurance ($20,000) 10% Coinsurance ($15,000) Amount Payable $180,000 Amount Payable $135,000 Total Claim Payment = $315,000 5

7 Claims and Recoveries (continued) Example 1b: Same scenario as 1a, but with $70,000 salvage Total Debt: $350,000 Existing Policy Payment: $180,000 CAP Limit Payment: $135,000 Total Claim Payment: $315,000 Existing Policy and CAP Limit EH Pro-rata Share of Salvage Client s Pro-rata Share of Salvage Salvage $70,000 $315,000/$350,000 = 90% $35,000/$350,000 = 10% $70,000 x 90% = $63,000 $70,000 x 10% = $7,000 Example 2a: Total debt is greater than combined coverage; where Existing limit: $200,000 CAP Limit: $200,000 Total Debt: $450,000 Existing Policy CAP Endorsement Total Debt $450,000 Total Debt $450,000 Existing Limit $200,000 Less Existing Limit ($200,000) = $250,000 Existing Limit Claim Amount $200,000 Additional Claim Amount $200,000 (Note: restricted by CAP limit) 10 % Coinsurance ($20,000) 10% Coinsurance ($20,000) Amount Payable $180,000 Amount Payable $180,000 Total Claim Payment = $360,000 Example 2b: Same scenario as 2a, but with $90,000 salvage Total Debt: $450,000 Existing Policy Payment: $180,000 CAP Limit Payment: $180,000 Total Claim Payment: $360,000 Existing Policy and CAP Limit EH Pro-rata Share of Salvage Client s Pro-rata Share of Salvage Salvage $90,000 $360,000/$450,000 = 80% $90,000/$450,000 = 20% $90,000 * 80% = $72,000 $90,000 * 20% = $18,000 6

8 Claims and Recoveries (continued) Example 3: No existing limit; where Existing limit: $0 CAP+ Limit: $75,000 Total Debt: $100,000 Existing Policy CAP Endorsement Total Debt $100,000 Total Debt $100,000 Existing Limit $0 Less Existing Limit $0 Existing Limit Claim Amount $0 Additional Claim Amount $75,000 (Note: restricted by CAP+ limit) 10 % Coinsurance $0 10% Coinsurance ($7,500) Amount Payable $0 Amount Payable $67,500 Total Claim Payment = $67,500 This information is for illustrative purposes only and does not constitute a contract of insurance. It is solely intended to provide a general overview of the coverage described. Nothing contained herein should be construed as an acknowledgement by Euler Hermes that a given claim will be covered under a particular policy. Every situation is unique and all claims are be governed by the terms and conditions of the policy and endorsements issued. Refer to the CAP endorsement for details. 2013, Euler Hermes North America Insurance Company. 7