Trade Credit Insurance?

Credit Insurance can be a viable alternative for smaller companies whose lenders require it, or those that do a lot of export business. One of the most important things to look at is a particular insurer’s “appetite” for the type of risk you have. This information is provided for your general guidance only, You need to work with an expert insurance broker to craft the right solution for you, and get competitive quotes. We can recommend one if you are interested.

Credit Insurance Policy Types

  • Whole Turnover Policy is the typical coverage, meaning all your sales are insured, without any exception. This prevents “negative selection” ; that is, trying to insure only the questionable accounts.
  • Key Account Credit Insurance – insuring only your largest credit exposures or best sales expansion opportunities
  • Single Customer or Distressed Account Credit Protection via Accounts Receivable “Puts” are a capital markets solution for major ($500,000+ $100,000,000) risks for single accounts. See our post on Accounts Receivable Puts for more information

Benefits of Credit Insurance

  • Provides protection against unexpected revenue, profit and cash shortfalls caused by bad debts or the insolvency of major customers or suppliers,
  • Enables you to sell more to domestic or foreign customers with whom you might have been too conservative in the past. You might now be able to enter new geographic markets or offer higher credit limits or longer terms of sale.
  • Your lender may be able to increase your borrowing availability due to the extra layer of protection afforded by the mitigation of a large customer concentration, foreign receivables, etc.
  • Can be used an additional source of credit information, particularly on foreign customers.

Credit Department and Risk Management

Having credit insurance does not give you a pass on maintaining credit controls, procedures, and policies, including required reporting to the insurance company. You still need to have a credit function, and solid credit controls. Contact us for more information.