What is Credit Insurance?
Credit insurance is purchased by businesses to protect themselves against the risk that a customer
defaults on a payment obligation for the delivery of goods and/or services provided on credit terms.
Non-payment can be due to the customer’s insolvency, default or political causes.
The insured is the party purchasing the insurance policy who assumes the rights and obligations of
the policy, the insurer is the company underwriting the risk of non-payment.
Trade credit insurance can be split into commercial risks and political risks. Commercial risks involve
the insured’s customers and their ability to pay for the delivery of goods and/or performance of a
service to the insured. Commercial risks will usually include insolvency and protracted default of the
customer. Political risks involve political events in the customer’s country which give rise to a loss,
such as war, embargos or other governmental restrictions on trade.
Who is Credit Insurance for?
Credit insurance is designed for businesses of all sizes, from SMEs to Multinationals, selling goods or
services on credit terms to another business.
Credit Insurance Benefits
By purchasing a trade credit insurance policy, businesses are able to protect their debtor book and
extend insured credits to their customers while reducing the risk of payment default. In addition,
the following are further benefits of purchasing a trade credit insurance policy:
Protects the company accounts, profit and cashflow against non-payment by paying the
insured promptly for claims.
Insurers offer risk management and have access to a wealth of information on buyers and
industries to assist commercial decisions.
Potential to gain competitive advantages including extended credit limits, higher credit
limits, longer payment terms and expansion into new markets to enable businesses to grow.
The ability to increase bank security and make borrowings and finance more accessible.
Insurers have access to financial information, credit information and can offer advice
regarding existing, new or potential customers.
Credit insurance can be incorporated into a company’s credit controls procedures to help
businesses make informed decisions.
The potential to decrease bad debt reserves and strengthen the balance sheet