I'm not a quant or banker but I don't think that's true. When a credit event is triggered, there's an auction for recovery of the defaulted bonds/loans, and then recovery is what's left from par.
In addition, you have to take net present value of the settlement into account. Money compounds, it doesn't grow linearly. Let's say there's a 10% chance of a credit event in a year, a 0% chance today, and the chance grows linearly (27 bps/day). Even if the chance of a credit event grows linearly, and you hold the recovery rate steady, the net present value of the recovery amount grows as a function of e.
All that to say, I don't think what you are saying is correct.
In addition, you have to take net present value of the settlement into account. Money compounds, it doesn't grow linearly. Let's say there's a 10% chance of a credit event in a year, a 0% chance today, and the chance grows linearly (27 bps/day). Even if the chance of a credit event grows linearly, and you hold the recovery rate steady, the net present value of the recovery amount grows as a function of e.
All that to say, I don't think what you are saying is correct.
See here for the correct formula: https://news.ycombinator.com/item?id=35154072