Trade Credit Insurance

Coverage Benefits Exclusion

Overview

Almost 50% of domestic B2B sales are made on credit terms that average around 30 to 45 days. Usually, 10% of invoices remain overdue over 90 days. The proportion of uncollectable receivables has increased mainly due to liquidity concerns. It has been observed that payment delays greater than 3 months and the value of uncollectable receivables in India is well above the Asian average.

  • Do you want to expand your Sales to new markets, without fear of defaults?
  • Do you lose your sleep over the Account Receivables which form almost 35-40% of your Current Assets?
  • Have you ever experienced Defaults in payments due to Insolvency of your Buyer?
  • Have you ever wished that you could insure risk of Payment Defaults by your Clients?

Coverage

The policy has been designed to cover insured against the commercial risks of their buyer’s default. Under this policy we will cover the portfolio of buyers and pay an agreed percentage of an invoice or receivable that remains unpaid as a result of covered causes of loss. The causes of loss covered under this policy are:

  1. Commercial Risks
    • Bankruptcy - liquidation, official insolvency and the equivalent concepts
    • Protracted default - a situation where an insured buyer has not paid the insured at the end of a waiting period ie.150 days from the due date or the extended due date
  2. Political Risks
    • Moratorium
    • Transfer Restriction / Inconvertibility i.e. non-payment caused by governmental action e.g. restrictions on payments in hard currency or import restrictions
    • War, riots
    • Import/ Export Restriction
    • Natural Disaster
    • Cancellation of import or export licenses by the government

Benefits of Trade Credit Insurance

  • Risk protection (Insolvency and Delay in payment)
  • Increase credit limit to unknown customers
  • Increase sales to major/known customers and subsequently increase in profits margin
  • Win back lost and new clients
  • Support clients’ international ambitions (A large potential market)
  • Safe expansion into new countries and markets
  • Mitigates concentration of risk or spread of risk to major buyer
  • More Attractive Bank Financing
  • Helps establish new foreign markets to increase export sales
  • Frees up Working Capital
  • Offers a solution for directors and officers by providing a second opinion on customer credit limit decisions and monitoring the customer portfolio
  • Caps Exposure to Bad Debt Loss
  • Support for your Credit Risk Evaluation through third party evaluations of customers, prospects, industries and countries
  • Provides a structure and discipline for credit decision making
  • Gain leverage over problem accounts by using underwriter’s clout and resources

Exclusion

  • Disputed Trade Transactions
  • Countries which are not covered
  • Sales to Sister Concerns or Subsidiaries or Government Department
  • Expiry of Import and export licenses
  • Third-country shipment
  • Radioactive contamination
  • War between the major powers