collateral calls

Definition

Demands made in the form of phone calls to banks on insurance contracts they've written to request collateral. If an individual insures a large bond to eliminate their risk of losing money on the bond if the issuer goes out of business, the insurance provider creates a contract that states they will give the individual the value of the bond. There is also risk to the individual the insurance company or bank could be unable to make good on their contract to pay the value of the bond, therefore collateral is paid from the bank or insurance company to the individual. If the risk level of the insuring company increases, the individual can make "collateral calls" for additional collateral against the insured item.

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collateral assignment collateral creditor