Trade Credit Insurance

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. Under this policy credit insurer usually covers a portfolio of buyers and pays an agreed percentage of an invoice or receivable that remains unpaid as a result of insolvency, bankruptcy or protracted default. For e.g. An Indian toy manufacturer sells toys on credit to International Clients. It seeks protection against payment delays and non-payment by its buyers. A “Whole turnover” trade credit insurance policy, which covers all of the toy manufacturer’s buyers, the “good, the bad”, is the solution . In exchange for a premium, which is based on the annual turnover and credit risk of its buyers, the toy manufacturer receives protection up to an agreed percentage of any losses incurred against late payment or the failure to pay by its buyers.