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Credit Insurance Protection against Credit Losses
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What can credit insurance offer you?
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Credit insurance is an effective means of protecting against credit losses:
1. It objectively checks and regularly monitors customers' creditworthiness.
2. If a customer becomes insolvent, the credit insurer supports the insured in debt collections.3. It reimburses the loss.
What risks can be covered?
These days it is possible to insure receivables due from debtors practically anywhere in the world with credit insurance, although there are temporary restrictions on the list of countries. In addition to the commercial bad debt risk it is also possible to cover the political risk. Terms of up to 180 days are the norm in credit insurance. Where capital goods are concerned, it is possible to cover credit terms of up to five years.
How does it work in practice?
The credit insurance company makes a professional check of customers' financial situations and, after requested by you, sets the sum insured for each customer. Smaller debtors can be covered without a detailed investigation by the credit insurer. During the term of the policy the credit insurer monitors the solvency of your customers. If it realizes that there is a threat of a situation worsening, the insurance company informs you immediately, allowing you to react promptly and avert potential losses on receivables. If a customer becomes insolvent, |
the credit insurance companypromptly reimburses the credit loss. |
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In this way you remain liquid. Up to 90% of the loss is reimbursed, depending on how theindividual policy is set up. |
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You are responsible for the remainder. This retention ensures that you, too,maintain an interest in the accounts receivable and enables the insurer to keep the insurance premium low.
Is it possible to insure credit risks using stop-loss and finite solutions?
As in other areas of insurance, stop-loss and finite concepts are becoming increasingly common in credit insurance. As specialist brokers we have a decisive influence on this trend.
What is the cost-benefit ratio?
Premium rates are always calculated individually and depend on the receivables risk to be insured. But the insurance premium does normally not exceed some thousandths of turnover. Structuring the insurance and service components to suit your requirements ensures the optimum insurance solution.
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