Trade Credit Insurance

Trade Credit Insurance

Trade Credit Insurance protects businesses from bad debt caused by a customer’s insolvency or payment default. It safeguards cash flow. So should the worst happen and non-payment occurs credit insurance will replace the cash, safeguarding the future of the company.

Trade Credit Insurance ensures that your company is not adversely affected by the unforeseen failure of one or more of your customers; it is also a tool to help you manage your risks.

Advantages

  • Protects credit terms sales against customer default.
  • Increase sales to new and existing customers.
  • Mitigate concentration risk.
  • Facilitates attractive bank financing.
  • Access foreign markets by providing open credit terms, thus increasing export sales.
  • Provides insured credit limits per customer, allowing for the monitoring of credit.
  • Reduce bad debt reserves.
  • Provides cost-effective collection agency services.

Do you want to know how trade credit insurance can significantly increase your company’s sales and profits while reducing your overall business risk? Call today at 718-871-3282

GET STARTED

Increase Sales

Mitigate Concentration Risk

Reduce Bad Debt

Trade Credit Insurance FAQ’s

What is Trade Credit Insurance?

Trade Credit Insurance is a protection on your accounts receivable against risks of non-payment of goods or services by your buyers whether they are located in the same country as your company (domestic risk) or in another country (export risk). It covers non-payment as a result of insolvency of the buyer or non-payment after an agreed number of months after due-date (protracted default). It can also insure the risk of non-payment following an event outside the control of the buyer or the supplier (political risk cover), for example the risk that money cannot be transferred from one country to another.

Why should I insure my accounts receivable?

An average of 40% of a company’s assets are in the form of trade debts that constitute one of the most vulnerable assets when it comes to risk of loss. A company’s balance sheet is critically dependent on trade debt payment to ensure cash flow & profitability. Trade Credit Insurance is a protection against your customers’ failure to pay these trade debts should they become insolvent (C.C.A.A., Chapter 7, Chapter 11) or fail to pay within the agreed upon time frame (refusal to accept goods, past-due accounts).

How much does Trade Credit Insurance cost?

Insurers have different ways of insuring receivables. Policy holders can often choose smaller or larger risk sharing options. Policies that are currently offered can cover domestic sales as well as world-wide sales, depending on the wishes of the customer. Customers can often choose between insuring a portion or all their sales. All these factors influence the premium rate widely. Insurers offer a free quote without any obligation, as your named broker we evaluate these proposals for you.
Trade credit insurance is priced on the basis of standard actuarial techniques. It is sold mostly on a whole turnover basis (whole turnover cover policy) and premium rates are generally given as a percentage of the company’s turnover (including financially sound and weak customers). Obviously, the future turnover is not known at inception and so the premium is not known either. Therefore, a minimum premium amount is usually an integral part of the contract.

Some of the criteria looked at to determine pricing are:

  • Annual Sales
  • Buyer Countries
  • Client Risk Retention
  • Concentration Risk
  • Endorsements to the Policy
  • Loss History
  • Sectors of Industry
  • Terms of Sale

Do I need to insure all my clients?

Trade credit insurance policies are tailored to fit your size, sector and business ambitions resulting in a custom made policy at a corresponding affordable premium. Most trade credit insurers also offer standard policies, which may be more suitable depending on the trade to be insured. Many trade credit insurers have also developed particular policies aimed at small and medium sized enterprises (SME). These policies have low administration, and are competitively priced. Companies that are concerned about only a few of their buyers can opt for a trade credit insurance policy that covers only those buyers.

What is political risk?

Aside from business factors arising from the marketplace, companies are also impacted by political decisions that are beyond a company’s control and can affect individual businesses, industries and the overall economy. These can include taxes, spending, regulation, currency valuation, trade tariffs, labor laws such as minimum wage laws, and environmental regulations. Companies are subjected to multiple risks such as the inability to convert local currency and repatriate it, contract interruption, non-payment, confiscation, sovereign debt default or geopolitical unrest. Trade Credit Insurance can remove or mitigate certain political risks. This allows management and investors to concentrate on the business fundamentals knowing losses from political risks are avoided or limited.

What are the benefits of Trade Credit Insurance?

Better financing: Trade Credit Insurance collaterizes your accounts receivable which in turn improves your position with lenders, allowing them to improve margining and/or bank financing conditions.

Sales growth: Trade Credit Insurance helps you safely grow your sales & expand your business in domestic or international markets to new & existing customers. It gives you a competitive advantage by allowing you to offer safe, more lenient open payment terms or larger order sizes. It can also allow you to reduce bad-debt reserves in order to increase your cash flow.

Risk transfer: Trade Credit Insurance is a protection against your customers’ failure to pay these trade debts should they become insolvent (C.C.A.A., Chapter 7, Chapter 11) or fail to pay within the agreed upon time frame (refusal to accept goods, past-due accounts). It is the best protection for your business from the risk of customer default and catastrophic loss by making sure you get paid.

Risk management: Trade Credit Insurance gives you the best information to make the right decisions for your business and works closely with your internal credit manager to optimize your business’ credit management.

Will my Trade Credit Insurance policy be more expensive if I a Trade Credit Insurance Brokerage?

No. There is no cost to the insured in making use of a broker’s expertise. A part of our service to you is to ensure you have access to the best rates & that your Trade Credit Insurance policy is tailored to your needs. Your Trade Credit Insurance policy is likely to be less expensive.

Looking for more information? Reach out to one of our specialists Click Here

Looking for Trade Credit Insurance? Apply Now.

GET STARTED
Privacy Settings
We use cookies to enhance your experience while using our website. If you are using our Services via a browser you can restrict, block or remove cookies through your web browser settings. We also use content and scripts from third parties that may use tracking technologies. You can selectively provide your consent below to allow such third party embeds. For complete information about the cookies we use, data we collect and how we process them, please check our Privacy Policy
Youtube
Consent to display content from Youtube
Vimeo
Consent to display content from Vimeo
Google Maps
Consent to display content from Google
Spotify
Consent to display content from Spotify
Sound Cloud
Consent to display content from Sound
Save