Credit risk insures against the possibility that one of two contracted parties will not be able to meet with a contract’s financial obligations. The amount of risk provided for in insurance arrangements depends on the parties’ financial stability.
Types of Insurance
Trade debtors are a company’s largest assets. If a debtor becomes insolvent and fails to pay, credit risk insurance will make sure a company’s cash flow will not be a casualty. Types of policies can include:
- Key accounts
- Whole turnover
- Single risk
- Export, political or domestic risks
Why Use It?
Credit risk insurance lends structure and control to credit management. Benefits include:
- Working capital
- Risk assessment
- Cash on delivery
- Risk monitoring
Not only can companies that provide credit risk insurance protect businesses from financial losses due to insolvency or non-payment but also cover losses incurred through world political events and cover disputed debts.
Insurance payouts are typically around 90 percent and cover all sectors of trade. Coverage extends to a single customer, all of them or a defined group.
- Transfer risk – A trade-debtors risk transfers to an insurer.
- Lost revenue – If the insured party holds an underwritten insured limit, payouts are typically 90 percent of the revenue loss.
- Multi-use or single – This option covers one, several or all customers.
- Trade type – Credit insurance is available for all sectors of business.
Credit insurance has been a proven coverage option for more than 100 years. Knowledgeable and experienced credit professionals make it their mission to arrive at a policy that ensures companies will be covered against insolvency and protracted default. Contact Trade Risk Group to discover more.