Companies are quick to insure their physical assets, such as their premises and stock. But in reality, up to 40% of a company’s total insurable assets is typically taken up by accounts receivable – money that you’re owed. It’s therefore vital that you protect these outstanding debts, too.
For B2B companies who extend long credit terms to commercial customers for goods or services received, a non-paying customer could have serious financial ramifications. A few cases of non-payment could wipe out your working capital or force you into bad credit yourself. For companies who rely on several key accounts for the majority of their sales, it could even threaten bankruptcy. Trade credit insurance is a way for companies to protect themselves against losses due to credit risks such as protracted default, bankruptcy or insolvency on the part of their customers, resulting in non-payment.
Almost any company trading with customers based in other countries may also want to consider trade credit insurance. Trading abroad carries additional risks when compared with domestic trade. Customs can slow the transaction of money or introduce delays into the supply chain. It’s also more difficult to assess the financial stability of clients based overseas or predict instances which could result in delayed payment. These risks can be absorbed by political risk cover, sometimes specifically referred to as export credit insurance, as the insurer can typically pay out for any outstanding invoices from foreign clients.
Trade Credit Insurers
There are three key players dominating 85% of the trade credit insurance market worldwide. This list begins with these market leaders, before providing alternative companies offering trade credit insurance to UK-based companies. Trade credit policies tend to only be available from specialist insurance providers or suppliers that specialise in commercial insurance. You can find details of the products offered by such insurers on their websites. Some sites provide an online tool to generate a quote, while others give contact details of underwriters and advisers to contact directly.
Euler Hermes
Euler Hermes is the world’s largest credit trade finance company, operating in over 70 countries worldwide. Their trade credit insurance policies cover accounts receivable with 12-month policy terms. They begin by carrying out a customer health check on all your customers, investigating their creditworthiness and financial stability to determine their level of risk. They then calculate a credit limit per customer and indemnify you against non-payment up to these limits.
Euler Hermes has several main trade credit insurance products available. Their Simplicity product is designed for small companies, for debts of over £200 with payment terms of 90 days after the invoice date. The policy covers 60% of any debt up to the maximum claim per customer, and there’s no excess. They also have a similar plan tailored to medium and large businesses as well as a programme designed exclusively for organisations operating across two or more countries with a turnover of over £500 million.
Euler Hermes uses a variety of technology-driven information tools to collate data and analyse the industry risk to offer predictive insight into market trends. This helps policyholders make informed strategic decisions, as they receive automatic updates if any customer grades changes. Similarly, they can advise on best credit management practices to help your company mitigate their risk. Euler Hermes’ expert team can arrange bespoke cover to accommodate each company’s individual needs, and you can access a quote on their website.
Atradius
Atradius uses a local approach, despite having a global reach. Customers are advised by a UK-based team who are experts in the local market, who work closely with international advisers to support customers with their worldwide knowledge in overseas markets. Their trade credit insurance is designed with simplicity and efficiency in mind as they use just one policy structure, Modula. This policy has the flexibility to adapt to differing trade exposures, at the same time offering consistency around the world to cover markets in other territories.
This standardised approach aims to increase clarity, using multilingual underwriters and legal experts to align the policies across multiple countries. Atradius also pride themselves on a transparent policy, making sure that insured companies are clear on the terms of their agreement and understand their cover. Their credit insurance policies come with business debt collection at no extra charge.
Policyholders can enjoy easy access to their policy through Atradius Atrium, an easy-to-use online platform allowing companies to manage their policy, notify the insurer of claims and make changes. Atradius Insights is another sophisticated tool available through Atradius which companies can use to identify their risks and monitor the performance of their portfolio. To arrange a policy or seek advice, you can find your local office on their website and get in contact on email or over the phone.
Coface
The third global leader in trade credit insurance is Coface, who check over 80 million companies worldwide. They boast over 4,000 experts across 100 countries, offering policies with a global reach. A trade insurance policy from Coface can cover you against bad debt, late payments, political risk, natural disaster as well as pre-shipment risks, and more. Coface can help monitor your customer’s financial health using data-driven intelligence and advise you on implementing an efficient credit management system to mitigate risk and enable you to pursue new business opportunities. They can offer policies suitable for trading domestically as well as overseas, and their data intelligence can offer insights to help you identify new opportunities for growth in new territories.
Policyholders can enjoy regular updates on data relevant to their industry, allowing them to make informed strategic decisions in their markets. These include barometer reports on political risks and economic trades to make sure you are always one step ahead. For more information or to arrange a policy, you can submit an interest form on their website.
AIG
With licenses in 70 countries, AIG has 35 years’ experience in trade credit insurance. Their policies protect businesses selling goods and services against the risk of non-payment due to protracted default and customer insolvency as well as a range of political risk. They can cover domestic, international and global accounts receivable, with the possibility to insure key customers or a single-buyer. They have a range of products suitable for companies with short, medium and longer payment terms.
Companies with an annual turnover between £10 million and £50 million have access to AIG’s Global Limits Manager when they take out a trade credit insurance policy. This facility is a state-of-the-art credit limit management platform which uses live sales ledger data to set customer credit limits. This service simplifies the administration process for policyholders and offers companies the most up-to-date information to make informed credit decisions.
AIG’s policies stand out for their non-cancellable limits which allow customers to trade throughout the life cycle of the policy with the assurance that they have consistent cover throughout. You can contact their UK trade credit leaders directly via email, available on their website.
Zurich
One of the many business insurance solutions on offer from Zurich is their trade credit product. This policy is available to a wide range of companies, including exporters, traders, manufacturers and banks to protect against both commercial and political risk. Single debtor policies are available for medium-term or individual credit risks, and they also offer short term multi-buyer trade credit insurance. They, too, provide non-cancellable limits, securing you against the lifetime of the policy. They can insure companies for both domestic sales as well as export.
Zurich’s global reach means they are able to produce a single comprehensive policy for companies operating around the world or issue separate policies written locally to better fit the market in question. Policy types available through Zurich include whole turnover, key account, single buyer, top-up as well as receivable purchase programmes. Zurich’s products are only available through a broker.
QBE
Comprehensive trade credit insurance is available from QBE. Their products insures companies against a range of political and commercial risk, offering companies the financial stability and confidence to grow into new markets. They are able to insure companies of all sizes, from SMEs to global corporations. As part of a trade credit insurance policy, companies benefit from QBE’s continual credit control processes, which continuously assess buyer risks. This system notifies companies of changes and warning signs, to make informed decisions and avoid risky debtors.
Companies who take out a policy with QBE have access to their online Trade Credit System, which offers real-time visibility of the underwriting process and decisions. This efficiency is continued with their fast claims service, including a fast-track service for smaller claims. You can make an enquiry on their website or get in touch via email or over the phone.
Credendo
A range of trade credit insurance products is available from Credendo. These include their convenient and accessible comprehensive policy for companies across all sectors. This policy offers up to 90% cover for commercial risks as well as cover for political risks around the world. As part of your plan, Credendo offers a debt collection service to help recover outstanding debts in a variety of markets.
Credendo’s policy also provides a rigorous creditworthiness assessment of your customers. Their monitoring processes can flag up any potential issues related to the markets you operate in or the customers you work with, enabling you to take early preventative action and avoid losses. By entering your location on their website, you can find your domestic Credendo contact for more information.
ArgoGlobal
Founded in 1957, ArgoGlobal is a leading specialist insurance provider. Their credit and political risk policy can cover traders, investors, manufacturers and lenders against credit risks that might affect their cross-border trade transactions. They cover a wide range of political and commercial risks, including non-payment, pre-shipment perils, exchange transfer and currency inconvertibility as well as un-honoured letters of credit. ArgoGlobal can write policies which apply to territories around the world, ideal for multinational corporations operating in multiple overseas markets. You can contact their underwriters directly by phone or email through their website.
Summary
Companies who trade with other businesses are always at risk of loss from a range of credit risks, such as their customers going bust or being unable to pay their debts. More than four out of five daily business-to-business transactions in the UK are based on credit terms, which means companies can wait weeks or months until they receive funds owed to them for goods delivered or work already completed.
If one of your commercial customers cannot pay their debts on time or goes bust during this period, this can put your business at risk of bad credit. If you rely on one or two large customers, non-payment could have a devastating impact on your company or even threaten its survival. Fortunately, trade credit insurance is a way for companies to insure their accounts receivable when buyers can’t pa
Trade credit insurance can be helpful for any business of any size that sells goods or services on credit terms to other companies, no matter the industry or type of goods or service being traded. It’s particularly popular among companies with long payment terms, such as businesses in construction and retail, where invoices may not be due for up to six months. If the threat of a non-paying customer could strain your cash flow or even threaten to buckle your business, then trade credit insurance is something to consider.
Q/A: What is an Excess of Loss policy?
An Excess of Loss structure is only available to very large, multinational corporations. They typically come with high discretionary limits, meaning there’s less of a need for approved credit limits and underwriting involvement, affording such companies greater freedom and autonomy. For this reason, they are usually only offered to companies with proven credit management.
