Trade Credit Insurance
Safeguarding Your Cash Flow Against Payment Defaults
In the post-COVID economy, many businesses have faced significant disruptions to their cash flow, with Accounts Receivables (AR) taking a major hit due to delayed or non-payments. One in ten invoices often goes unpaid, and for companies where receivables make up nearly 40% of total assets, this poses a serious financial risk. That’s where Trade Credit Insurance becomes not just relevant, but essential.
What is Trade Credit Insurance?
Trade Credit Insurance protects your business from losses resulting from a customer’s inability or unwillingness to pay, ensuring your cash flow remains stable and uninterrupted. Whether due to bankruptcy, political instability, or prolonged payment delays, this insurance acts as a safety net for your receivables.
Why Your Business Might Need Trade Credit Insurance
Most companies diligently insure their physical assets—but neglect the largest unsecured asset on their balance sheet: Accounts Receivable. With market volatility, global supply chain disruptions, and economic uncertainty on the rise, Trade Credit Insurance provides an added layer of financial security, helping you confidently extend credit to customers and maintain consistent revenue.
Key Benefits of Trade Credit Insurance
Protects against bad debt losses from customer non-payment
Helps in securing financing by improving creditworthiness with banks and lenders
Supports better credit management with real-time monitoring of customer credit profiles
Enhances collections strategy by providing insight into client solvency
Enables businesses to confidently expand into new markets or increase credit limits for existing customers
When Should You Consider Trade Credit Insurance?
Businesses with long collection cycles, exposure to politically or economically unstable markets, or reliance on a few large customers should consider Trade Credit Insurance. It’s especially vital for those operating in uncertain or post-pandemic environments where credit risk has multiplied.
How Does Trade Credit Insurance Work?
The process begins by identifying the scope—whether you want to cover a specific client, customer group, or your entire receivables portfolio. Based on your needs, insurers offer custom policies tailored to the size, sector, and geography of your operations.
Trade Credit Insurance FAQs
Trade Credit Insurance protects businesses against the risk of non-payment from customers due to insolvency, bankruptcy, or payment default. It ensures that your cash flow remains stable even if your buyer fails to pay.
It is ideal for:
● Manufacturers
● Wholesalers
● Exporters and importers
● Distributors offering goods/services on credit
Any business that extends credit to customers can benefit from it.
It typically covers:
● Non-payment due to customer insolvency
● Protracted default (delayed payments beyond a set period)
● Political risks (for international trade)
● Buyer bankruptcy
Exclusions may include:
● Disputes over quality or service
● Sales to related or group companies
● Cash sales
● Pre-existing overdue debts
● Non-contractual sales
You declare your credit sales, and the insurer monitors the creditworthiness of your buyers. If a buyer fails to pay, you can claim compensation based on the policy terms (usually a percentage of the outstanding invoice).
No, Trade Credit Insurance applies to both domestic and international trade transactions.
Premium depends on:
● Total credit sales value
● Number and size of buyers
● Credit terms
● Risk profile of customers (industry, location, etc.)
● Claims history
Yes. You can choose:
● Whole turnover policy (covers all buyers)
● Key buyer policy (covers specific large clients)
● Single transaction cover (one-off large deals)
● Protects cash flow
● Reduces bad-debt risk
● Supports business growth through safe credit extension
● Helps in securing better bank financing
● Improves credit control systems
● Notify the insurer about overdue invoices
● Submit proof of debt, communication, and invoices
● Wait for the specified waiting period
● Insurer evaluates and settles the claim as per policy terms