Who assumes the risk of an insured debt in a credit insurance policy?

In a credit insurance policy, the insurer assumes the risk of an insured debt. This insurance is designed to protect creditors against the risk of default by debtors, meaning that if a debtor fails to repay the borrowed amount, the insurer will compensate the creditor for the loss incurred. The insurer evaluates the risk associated with lending and may offer coverage based on factors such as the creditworthiness of the debtor and the financial stability of the creditor.

The debt itself is typically the liability of the debtor, but it is the insurer who bears the financial risk in the event the debtor defaults. This mechanism allows creditors to mitigate potential losses and sustain their operations even when faced with a default on repayment. Understanding this role helps to clarify the structure of credit insurance and the protection it provides to lenders in the financing ecosystem.