Trade credit insurance
Trade credit insurance protects the sale of goods and services conducted on trade credit terms (with deferred payment). It enables coverage of losses resulting from non-payment by customers.
A loss is triggered by a buyer’s protracted default or the legally confirmed insolvency of the debtor (including bankruptcy or restructuring). The insurer’s liability is limited to the amount of the credit limit: either individually granted for specific buyers by way of the insurer’s decision, or a discretionary limit for unnamed buyers, under which all buyers meeting specified criteria may be covered without the need to apply for an individual credit limit.
Benefits of trade credit insurance:
- transfer of the financial consequences of customer insolvency risk to the insurer;
- ability to conduct pre-transaction due diligence on prospective buyers;
- increased competitiveness by extending payment terms or increasing credit limits for buyers;
- improved cash flow;
- enhanced credibility of the company in the eyes of business partners and other financial institutions;
- management of the insurance policy through dedicated online tools provided by the insurer (applying for credit limits, reporting overdue receivables, instructing debt collection, applying for indemnity payments);
- possibility to secure recourse (non-full) factoring arrangements, or to integrate with non-recourse (full) factoring.