What is trade credit insurance?

Trade credit insurance protects businesses by minimising the financial implications if a customer fails to pay them. It provides covers for businesses against commercial and political risks that are beyond their control.

  • Commercial risk – the risk that the business’ customers are unable to pay outstanding invoices because of financial reasons, such as declared insolvency or failing to pay within agreed timescales as set out in terms and conditions (ie. protracted default).
  • Political risk – the risk that a customer does not pay or pays later because of events outside the business’ or customer’s control. For example due to political events (wars, revolutions); or economic difficulties, such as a currency shortage that causes problems transferring money internationally. Many trade credit insurance companies now offer comprehensive political risk cover as part of a standard credit insurance policy.

Trade credit insurers typically also have extensive knowledge of companies, sectors and economic trends that enable entrepreneurs to trade with confidence and grow their businesses safely.