An over-the-counter (OTC) financial derivative instrument that allows a lender or borrower to transfer the default of a loan to a third party. The lending party enters into an agreement (swap/option) with a counterparty (usually another lender), who agrees, for a fee, to cover any losses incurred in the event that the borrower defaults. If the borrower does not default, then the insuring counterparty pays nothing to the original lender and keeps the fee as a gain.