Trade Credit Insurance Explained

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What is Trade Credit Insurance?

Trade Credit Insurance provides protection from insolvency in your aged debtors. There are two triggers to a claim being insolvency or protracted default. In very basic terms if a customer of yours owes you money and becomes insolvent the insurance will cover 90% of the loss minus the excess structure you choose at inception. (subject to the terms and conditions of the policy)

Unfortunately we are often contacted by new clients after they have just incurred a major insolvency loss. Either their existing broker didn’t tell them trade credit insurance was available or the client thought their credit checks would be a safe way to handle credit risk. In many cases a Trade Credit insurance policy could have provided protection.

With trade Credit insurance you stop being an unsecured creditor for amounts that could cripple or destroy your own business. For a very small rate of total turnover you can protect your aged debtors report from bad debts.

This is not a area of insurance for the unsure or inexperienced which is why its worth contact Mercantile Trade Credit Insurance Brokers for further information on how Trade Credit Insurance can protect your business.

Industries

Whilst suitable to any industry which is doing sales on credit the following are some industries we regularly see getting benefit from Trade Credit Insurance.

Covers

Insurers

Atradius

QBE

Euler Hermes

Coface

AIG

The Bond and Credit Co.

Claims Examples

1. A plumbing wholesaling company provides $500,000 limit for construction material to a plumbing installation company who was contracting to a major builder. The major builder files insolvency leaving the plumber unable to pay for stock already installed. The wholesaler is now exposed to a $450,000 loss due the bad debt of the plumber.

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