The use of financial instruments to eliminate or mitigate credit and default risks posed by borrowers or issuers of debt (fixed income securities). In this respect, the credit risk is transferred from the insurance buyer into the insurance seller without transferring the underlying asset itself. Examples of credit default insurance include credit default swaps (CDS) and total return swaps.

In credit default swaps, credit risk is transferred, while in total return swaps, interest rate risk and credit risk are both transferred.