A primer from our CFO, Chip Corboy, on navigating the nuances of credit and demand insurance
You’re now even better protected when you work with Sovrn. We’ve insured nearly all of our demand sources against the risk of default, giving exchange publishers an extra layer of insulation from a fluctuating market. In this article, we’ll dive further into the nuances of credit and demand insurance and what it means. We’ll also go over our three-phase Sovrn Demand Protection Program, and take a look at both what has already happened and what’s coming next.
Phase 1: Credit insurance (complete)
As of February 2020, credit insurance is built in to being a publisher on the Sovrn exchange. Credit insurance is a big step, and it provides security against some DSP default risks—but it isn’t perfect. Our carrier, Euler Hermes, covers the vast majority of our demand—and thereby your demand. Insurance carriers are able to provide coverage for large, well-established public companies, but not so for smaller, private companies whose financial information may be less readily available. For those demand partners that are covered by our credit insurance policy, the insurer will reimburse us for 90% of covered losses in the case of default. In turn we will pass these insurance proceeds on to our publishers.
While our demand partners for whom we’ve been able to secure insurance protection comprise the substantial majority of our demand (89% for the three month period that ended April 30, 2020), we believe that some of the smaller, privately-held demand sources can be an important component to publishers’ advertising revenue. If publishers limit their demand sources only to large, established partners, they may be exposed to less risk of defaults, but also may inhibit their ability to maximize their earnings. That’s why, in addition to the third-party credit insurance, we continue to rely on our own stringent credit process.
We want our publishers to have access to information that impacts the risks and rewards of their advertising earnings. And we want to provide publishers with the tools to control the level of risk/reward appropriate for their business. Those further steps represent phases 2 and 3 of our Demand Protection Program. It’s important for you to know that whether or not you choose to make use of the next two phases, you’re still insured. In the case that one of our covered DSPs defaults, 90% of your earnings from that DSP will be protected.
Phase 2: protection pool (forthcoming)
The protection pool offering will allow publishers to further mitigate risk without limiting the number of demand sources they work with. For a small fee, calculated as a percentage of your advertising earnings through Sovrn, we will guarantee protection against sequential liability resulting from DSP default. As a result, publishers can ensure maximum earning potential while gaining the confidence that their earnings are protected. This will effectively mitigate the risk of losses for non-payment for those demand sources not protected by credit insurance.
Phase 3: Premium demand (forthcoming)
For those publishers who wish to have the security of knowing their earnings are protected from DSP default, but who do not wish to pay an additional fee, we will be offering a list of select demand sources for whom default risk is a minimum. For this more restricted list of demand sources, Sovrn will eliminate a publisher’s risk of sequential liabilities resulting from DSP default. Again, no publisher is required to participate in either phase 2 or 3 of the Demand Protection program.
We’ll have more information about how to sign up for and make use of these offerings in the near future. For now, if you have questions about our credit insurance policy or the Sovrn Demand Protection program, please don’t hesitate to get in touch.