Trade Credit Insurance 

What is Credit Insurance?    

Credit Insurance is a financial risk management tool which covers the losses sustained by a firm because of the non-payment of a trade debt.

It also allows you to -

• Optimize your cash flows requirement

• Reduce the cost of bad debts

• Lower bad debt provision

• Increase the focus on your core business 

• Protect the balance sheet

What risks are covered?   

Credit Insurance provides cover against non-payment of debt which arising from commercial risks and political risks.

Under commercial risks, you are covered against -

• the insolvency of your customers, and

• their defaulting on payment

Under political risks, you are covered against -

• government moratorium

• non-transfer risks

• cancellation of import license

• occurrence of war or revolution

Who can be covered?   

Credit Insurance is for everyone involved in either domestic or overseas trade.·   

• Trade receivable of any terms : D/P, D/A, Open Account

• Short-term credit : credit terms not over 180 days

• Business-to-Business transactions

Cost of Cover   

Premium rate of 0.1%-0.9% will be agreed at the beginning of an insurance period, generally 1 year. The premium rate takes into account a number of factors -

• The type of industry you are involved in

• The turnover of your company to be insured

• The countries you trade with

• The number of customers that you have

• Any bad debt experience, etc

• Agreed deductibles and/or thresholdMinimum

Premium based on the insurable sales turnover will be collected in installments on a quarterly, semiannually, or yearly basis. 

Insured Percentage   

The indemnity level is usually 90% which means the insurer will pay 90% of the outstanding balance of invoice value in the event of a claim. 

When will claim be paid? 

• Within a period of 30 days in the case of an insolvency

• 5 months from the date of notification of overdue account with request for intervention in the case of a non-payment risk.

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