(a) A financial guarantee issued by a bank that permits the party to which it is issued to draw funds from the bank in the event of a valid unpaid claim against the other party; (b) in Reinsurance, typically used to permit reserve credit to be taken with respect to non-admitted reinsurance; and alternative to funds withheld and modified coinsurance.
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REINSURANCE: A financial guarantee issued by a bank that permits the party to which it is issued to draw funds from the bank in the event of a valid unpaid claim against the other party; in Reinsurance, typically used to permit reserve credit to be taken with respect to non-admitted reinsurance; and alternative to funds withheld and modified coinsurance.
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REINSURANCE: A financial instrument obtained from a bank that guarantees the availability of funds to be collected in the future under a reinsurance contract. In the noncommercial setting, these are known as standby credits in the event of non-performance by the obligor. Uniform Custom and Practices for Document Bearing Credits (2007 rev.) ICC, Pub. No. 600. See also Evergreen Clause.