Trade Credit Insurance

Recent events have exacerbated the challenges faced by the business environment, affecting both domestic and international trade. Numerous factors, such as global events, trade barriers, political unrest, exchange rates, transportation costs, and others, influence the flow of goods and services and their prices. Since the risk of non-payment can arise at any time, trade credit insurance can help you protect your receivables effectively and conduct your business relationships smoothly. Trade credit insurance is suitable for any company or financial institution that provides goods or services to another company on credit. Companies that typically hold such insurance include service providers, commodity traders, and manufacturing companies. Trade credit insurance aims to protect your company if a client fails to pay on time due to an adverse event (e.g., insolvency, inability to pay, etc.). With its help, your company can extend credit payment terms for clients and facilitate access to additional financing to cover outstanding receivables.

Trade credit insurance generally covers two types of risks:

• Commercial risk: due to the client’s inability to pay outstanding invoices for financial reasons (e.g., declared insolvency or inability to pay within the agreed period).
• Political risk: caused by various events such as wars, revolutions, natural disasters (earthquakes, hurricanes), or economic difficulties (currency crises limiting the ability to transfer owed money from one country to another).

There are several advantages your company can gain from holding such insurance:

• Increases the chances of obtaining additional financing from the bank for outstanding receivables. Keeps the company’s balance sheet protected with a pre-established reimbursement rate (usually between 75-90% of the debt value), even if your client declares bankruptcy or can no longer pay the amounts owed.
• Helps reduce capital tied up in another sector of the business and diminishes non-performing credit reserves.
• Increases resources available to expand into new markets or attract new clients.
• Our solutions can insure your entire client portfolio, but our consultants are available to create a customized insurance plan that includes only selected high-risk clients.

Trade credit insurance includes several services such as:

• Preventive protection: The insurer analyzes and evaluates your clients’ stability, sets the credit limit it is prepared to insure for each client, and updates it based on changes in financial data.
• Debt recovery: The insurer initiates the debt recovery procedure, attempting to collect them on your behalf.
• Compensation: If the client does not pay, the insurer analyzes the situation and compensates you for the insured amount according to the terms of the insurance policy.