TRADE CREDIT INSURANCE

Trade Credit insurance is also commonly known as Accounts Receivables insurance. Trade credit insurance provides protection on the accounts receivable of the company and thereby guarding them against a customer default due to any reasons. It is the best way to protect the company’s profit margin.

By purchasing Trade Credit Insurance, you can choose right customers or markets to trade in and provide the right credit limit. In case your customer is not able to pay due to any reason, the insurer will transfer you the amount of insured invoices and collect the debt from your customer.

Industries that need Trade credit insurance

• Transportation Construction Retail
• Electronics Household Equipment Textile
• Chemicals Computer / Telecom/ IT Food products
• Metals Commodities Jewellery
• Automotive Paper Services - factoring

THE RISKS INVOLVED

COMMERCIAL RISK

• Insolvency or bankruptcy of a customer
• Non-payment from a customer

POLITICAL RISK

• Issues regarding transfer and currency conversion
• Default of a public buyer
• Contract frustration
• Regulations or restrictions imposed by the government
• Act of war

10 BENEFITS OF PURCHASING TRADE CREDIT INSURANCE

1. Helps penetrate foreign markets

2. Reduces exposure to risks

3. Enhances lending capacity which provides competitive advantage

4. Helps in borrowing larger loans from bank (factoring).

5. Helps lower bad debt reserve

6. Converts provisions for bad debts in tax-deductible insurance premium

7. Enhances cash flow performance

8. Helps spread risk when company’s larger portions of sales are focused on few customers

9. Indemnifies losses

10. Helps prevent liquidity shortage

TYPES OF TRADE CREDIT INSURANCE POLICIES AVAILABLE

1. Domestic insurance – for companies that operate and trade in Canada

2. Export insurance – for companies that trade in foreign countries

3. Combined insurance – for companies that perform both domestic and international sales

4. Top account insurance – for companies that have maximum sales concentrated with a few selected customers.

5. Single buyer insurance – for companies that want to insure a single buyer or a particular transaction.

6. Excess of loss – for covering all risks associated to an underwriting policy after it is exhausted

WHAT WE CAN OFFER

1. Coverage that is non-cancellable – it comforts the insurer with the guarantee that during the period of insurance, approved country and buyer limit will not be cancelled or reduced

2. No additional charge – no buyer limit fee will be applied. New buyers can be added and approved buyer’s coverage can be increased with no additional cost

3. Customized endorsement coverage – special coverage can be crafted by recognizing uniqueness of the business model and identifying its needs

ELIGIBILITY

1. The goods and services you want to insure should be shipped or provided directly from Canada.

2. Goods and services to be insured must not involve prohibited and unlawful products and services like addictive substances, hazardous goods, military goods etc.

COST OF TRADE CREDIT INSURANCE

A number of factors affect the cost of credit insurance. Risk portfolio, historical loss, number of customers insured, customer base are some of the factors. As an estimate, annual premiums are approximately 0.1% to 0.4% of total insured annual sales.

Trade Credit insurance is also commonly known as Accounts Receivables insurance. Trade credit insurance provides protection on the accounts receivable of the company and thereby guarding them against a customer default due to any reasons. It is the best way to protect the company’s profit margin.