You are currently not signed in. Any products you have purchased will not be available until you Sign In.
For a personalized walk-through of IRMI Online, Request a Demo.

letter of credit (LOC)

A legal commitment issued by a bank or other entity stating that, upon receipt of certain documents, the bank will pay against drafts meeting the terms of the LOC. LOCs are frequently used for risk financing purposes to collateralize monies owed by an insured under various cash flow programs such as: incurred but not paid losses in paid loss retrospective rating programs, fulfillment of the capitalization requirements of captives, satisfaction of the security requirements of the excess insurer in "fronted" deductible or retention programs. For captives, LOCs serve two possible purposes: they may be used in lieu of or in addition to cash or other securities as capital and/or to securitize the fronting insurer's reinsurance receivable created by a nonadmitted reinsurer (i.e., the captive).

Links for IRMI Online Subscribers Only: RF III.K

More Risk Finance and Captives Information from IRMI
Books, Manuals, Newsletters IRMI
Risk Financing IRMI Online ReferenceConnect
Captive Insurance Company Reports IRMI Online ReferenceConnect
Captive Practices and Procedures IRMI Online ReferenceConnect
Captives and the Management of Risk IRMI Online ReferenceConnect
The Risk Report IRMI Online ReferenceConnect
Free Risk Financing Articles in
25 Risk-Conquering Ideas
Risk Finance
Captive Insurance
Additional Insured Insurance Law
Insurance Continuing Education Courses from IRMI
Ethics Considerations for P&C Insurance Professionals (CE)
Ethics in the P&C Insurance Workplace (CE)


Social Media

User ID: Subscriber Status:Free