In recent weeks we have had a number of enquiries from our clients regarding Credit Insurance. In the following article we attempt to shed some light on this topic which has come to the fore, given the current economic climate.

What is it?

A credit insurance policy protects a business from the risk of non-payment by its customers should they become insolvent or if there is a protracted default.

What is the benefit?

Apart from replacing the loss of income, it provides unrivalled access to credit intelligence on a worldwide scale, helping businesses offer trade credit to customers with confidence and security. Many companies use expensive and time consuming letters of credit to protect against non-payment when a credit insurance policy will cater for this just as well.

Additionally, many insurers offer a discounted or sometimes free, comprehensive debt collection and legal service to support the debt management process.

Most major insurers will assign an experienced credit underwriter to a policy who will then monitor and advise a business about its ever changing trade credit risks, both as they improve and decline. Real time limit decisions are delivered rapidly to a business via efficient online systems, saving valuable time and resource within the trade credit risk decision making process.

In fact, many banks will lend against insured credit limits where previously they may have restricted their appetite.

Why bother?

During this current period of worldwide economic uncertainty, many businesses will elect for a credit insurance policy to protect their balance sheet and provide comfort to their shareholders and financiers alike. You will protect your dividends and bonuses – hard earnt but easily lost if your income is not protected.

Most credit insurance policies can be tailored to meet an individual company’s specific requirements; therefore it should be possible for most to find a policy that suits both budget and appetite for sharing risk with the insurer if required.

Finally…

A final thought for consideration is that up to 40% of a typical company’s assets comprise trade debtors, yet this valuable asset is completely ignored when it comes to mitigating risk!

For more information on credit insurance or to request a quote call Chris Tebbit (Broking Director).