What is Trade Credit Insurance?
Trade credit insurance indemnifies an agreed percentage of an insured receivable when a buyer cannot pay for goods or services sold on credit terms due to insolvency, composition proceedings or protracted default.
Trade receivables are one of the largest assets on most companies' balance sheets. Non-payment by a major buyer can disrupt cash flow and make it harder for the company to meet its own obligations.
Trade credit insurance includes monitoring of buyers' creditworthiness by the insurer, a credit limit for each buyer, and indemnity in case of default. Political risks can be added for export sales. Insured receivables are also strong collateral in financing discussions with banks.
What is covered?
-
Commercial risk
Buyer insolvency, composition proceedings or protracted default.
-
Political risk (exports)
Events beyond the buyer's control such as transfer restrictions, war and import bans.
-
Buyer monitoring
Continuous monitoring of buyers' financial position and setting of credit limits.
-
Collection support
Handling of collection processes for overdue receivables.
Optional extensions
- Pre-shipment (manufacturing period) risk cover
- Assignment of receivables to banks and financing support
- Single-buyer or selected-buyer policies
Who is it for?
- Manufacturers and wholesalers selling on credit terms
- Exporters
- Distributors and companies working with dealer networks
- Firms using receivables-based financing
Information needed for a quote
Sharing the following information lets us obtain fast and accurate quotes from several insurers.
- Annual credit sales turnover (domestic / export)
- Buyer list and average payment terms
- Past bad debt losses
- Sales and collection terms
Frequently asked questions
Does trade credit insurance pay the full receivable?
Usually an agreed percentage of the insured receivable (for example 85–90%) is indemnified; the rest is retained by the insured. Percentages are set by the policy terms.
Do I have to insure all my buyers?
Classic policies cover the whole buyer portfolio or a defined segment for risk spread. In some cases a policy can be arranged for selected buyers or a single buyer.
Does trade credit insurance help with bank financing?
Yes. Insured receivables can be assigned to a bank to access financing on better terms.
Scope of cover and limits are determined by the general and special conditions of the issuing insurer.