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UKTI Export Week: How trade credit insurance facilitates international trade

This week is the UK Trade and Investment’s Export Week, which is celebrating and raising awareness about the UK’s export market and export finance. Businesses looking to expand into new markets or sell to new customers overseas can get peace of mind from trade credit insurance which plays a vital role to help businesses manage new and increased risks that come with exporting.

James Dalton James Dalton, ABI

According to the Insolvency Service, total company insolvencies in England and Wales are at their lowest level since 2007, and trade credit insurance is often only in the media when there is a high profile insolvency.

However, trade credit insurance supports firms at all stages of the business cycle, helping them to grow by minimising the financial risks that are out of their control, such as the insolvency of a trading partner. When a company agrees to sells its goods or services on credit to a customer, it places itself at risk of non-payment and the effect can be detrimental to the company’s balance sheet and future success. Trade credit insurance financially protects businesses that offer goods and services to their customers on credit. In fact, ABI members alone supported businesses worth over £300bn last year.

Trade credit insurers help their customers manage risk by offering guidance and advice about credit risks and new markets to help businesses expand.

In addition, this insurance helps businesses to grow with peace of mind and the confidence to extend credit to new customers. It can also improve their access to funding, often at more competitive rates. Trade credit insurers help their customers manage risk by offering guidance and advice about credit risks and new markets to help businesses expand.

Many businesses looking to grow will consider exporting to new countries and in particular embrace the opportunities that emerging markets offer. However, trading in new markets and with customers overseas brings new and increased financial risks, especially when credit terms are offered. Information on trading partners can be hard to come by or be out of date, and business practices, legislation, communications and solvency information can differ widely from market to market. This is why trade credit insurance is vital to manage trading risks for exporting companies, reducing the uncertainty for firms.

Exporting abroad can also be concerning for businesses where uncertain political situations can suddenly cause difficulties. Some insurers also offer political risk cover to protect their clients against actions by governments which could prevent the customer transferring funds abroad.

For businesses wanting to expand securely into new markets and improve their profitability, trade credit insurance can facilitate and encourage their international trade.

James Dalton is Director, General Insurance Policy at the Association of British Insurers (ABI).

Last updated 29/06/2016