GHI alt

Trade Credit Insurance

Table of Content

What is Trade Credit Insurance?

Trade Credit Insurance also known as Credit insurance is a risk management tool that covers the payment risk resulting from the delivery of goods or services. Trade credit insurance protects you against the risk of your customers not paying you when trading within India or overseas. For example, if your business supplies goods or services to other companies on credit terms, trade credit insurance can protect against your customers failing to pay you. This can be as a result of their business becoming insolvent or sometimes it can happen through no fault of their own, such as political or economic problems.

Why is Trade Credit Insurance Necessary?

Business Growth

A Trade Credit Insurance policy allows companies to feel secure in extending more credit to current customers, or to pursue new, larger customers that would have otherwise seemed too risky. The protection it provides allows a company to increase sales and grow their business with existing/new customers

Competitive Advantage

The rapid rise of emerging economies and intensified competition has increased the demand for aggressive credit terms by clients. Unfortunately, the harsh reality for businesses means there will be times when some customers cannot make their payments or will delay doing so. Trade Credit Insurance allows companies to confidently offer competitive terms to their clients.

Benefits of Trade Credit Insurance

Increased sales and market share

Trade Credit Insurance enables companies to extend more credit to customers while reducing the risk of non-payment, thereby promoting secured sales expansion, for example, expanding to new geographic areas and reducing dependence on L/C’s

Access to liquidity

Credit insurance may be accepted as collateral to improve lending facilities with financial institutions. This can potentially deliver additional funding capabilities to support a company’s growth.

Improved lender relationship

Trade credit insurance can improve a company’s relationship with their lender. In many cases the bank will require trade credit insurance to qualify for an asset-based loan.

Create shareholder value

Many public firms have used Trade Credit Insurance as a strategic solution to enable profitable growth and an assurance to shareholders that their large key assets on the balance sheet are protected. Accounts receivables may constitute upwards of 40% of assets on the balance sheet.

Features of Trade Credit Insurance

Buyer Insolvency

This policy protects your business against the risk of non-payment if a buyer becomes insolvent.

Protracted Default

Covers the financial loss when a buyer fails to pay the receivable within a pre-defined period calculated from the due date of payment of the receivable.

Political Risks

This refers to non-payment by the buyer due to external events beyond the control of both parties. It could include geopolitical disturbances like war, terrorist attacks, riots, or natural disasters. Political risks are valid only in the case of international buyers.

Why buy Trade Credit Insurance from Raghnall?

One Point of Contact

No need to coordinate with multiple points of contact and third parties. With Raghnall, you only need to stay in touch with us and no one else.

Product Expertise

At Raghnall, we have specialized underwriters and product experts who take time to understand your business and offer the coverages suitable to your needs.

Best Deals

As a fully independent broker we customize coverage catering to your needs and provide the best price for most comprehensive coverage.

Who should buy Trade Credit Insurance?

Trade Credit Insurance is ideal for companies selling goods on an open account basis. This policy can protect them from their defaulting trade partners (e.g., wholesalers and manufacturers) who buy their goods on credit. These can include both domestic and overseas commercial buyers.

Frequently Asked Questions

Trade credit insurance (TCI) is a method for protecting a business against its commercial customers’ inability to pay for products or services, whether because of bankruptcy, insolvency, or political upheaval in countries where the trade partner operates.

Some of the key exclusions under this policy are: Disputes with the buyer resulting withholding of partial or full payment. Cost incurred in resolving disputes between the insured and the buyer. Any penalties or damages buyer entitled to pay. Any interest accruing after the original due date of payment Banking cost, unless contractually agreed to be part of the amount owing from the buyer

Businesses of all sizes that offer their buyers credit can purchase trade credit insurance. These could include MSMEs, big corporations, and international businesses.

Yes, trade insurance policies can be tailored to suit businesses' specific requirements and nature. The standard policies are also available and are particularly useful for MSMEs.

Since trade credit insurance covers both international and domestic trade, the local/ domestic buyers can also be covered.