Trade Credit & Investment Risks

Trade credit insurance, also known as credit insurance or export credit insurance, is a type of insurance policy that protects businesses from the risk of non-payment by their customers.

Here’s how it generally works:

  1. Coverage: A company purchases a trade credit insurance policy to protect their accounts receivable against non-payment due to an insolvency of the buyer or a protracted default.
  2. Policy Terms: The policy terms may vary depending on the insurer and the specific needs of the business. It typically covers a percentage of the insured amount in case of non-payment.
  1. Benefits: Trade credit insurance helps businesses manage the risk of non-payment and protects their cash flow. It can also help them secure financing from banks since the insured receivables serve as collateral.
  2. Cost: The cost of trade credit insurance depends on various factors such as the creditworthiness of the buyers, the industry, the country of the buyers, and the coverage limits.
  3. Claims Process: In case of non-payment by a buyer, the insured business can file a claim with the insurance company, providing evidence of the default. The insurance company will then investigate the claim and if approved, compensate the business for the covered amount.

Overall, trade credit insurance is a valuable tool for businesses engaged in domestic and international trade to protect themselves against the risk of non-payment and ensure the stability of their operations.