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• ABI welcomes Government-backed temporary reinsurance scheme so businesses can continue to access trade credit insurance

  04/06/2020

  Scheme will provide reassurance to thousands of businesses who rely on trade credit insurance.  The ABI welcomes today’s Government announcement of a temporary, government-backed…

• Trade credit insurers providing a lifeline to help businesses cope with record levels of bad debt

  09/01/2020

  Latest figures published today by the ABI highlight that trade credit insurers have helped UK firms cope with a record level of bad debts...

• FAQ

  Who should get a trade credit insurance policy?

  Trade credit insurance can be suitable for companies trading on credit terms and insurers can provide cover to businesses of all sizes from SMEs to multinationals.

  If you are interested in taking out trade credit insurance you can speak to a general or specialist credit insurance broker. Their knowledge can help businesses get the most appropriate cover for their needs at the best price. Alternatively, businesses can also buy credit insurance directly from an insurer.

• Trade credit insurance FAQs

• How trade credit works

  THe cost of a credit insurance policy is based on a business turnover

• What is trade credit insurance

  Trade credit insurance covers businesses if buyers who owe them money do not pay their debts, or pay them later than expected.

• FAQ

  When does credit insurance pay out?

  Trade credit insurance will pay out a percentage of the outstanding debt to a business. This usually ranges from 75% to 95% of the amount, depending on the type of cover the business has.

• FAQ

  Why would businesses need trade credit insurance?

  The main reason a business would take out trade credit insurance is to reduce financial implications if a customer fails to pay. Without trade credit insurance in place, many more companies would suffer large financial losses, redundancies and put the business’ existence at risk. 

  However, trade credit insurance does not just protect businesses against any losses as a result of a customer being unable to pay their debts. Trade credit insurance also:

  • Helps businesses sell to new customers that may otherwise have been deemed too risky, knowing they are insured should the customer not pay their debts.
  • Provides additional support and knowledge to help the business avoid losses in the first place and help them grow safely.
  • Provides comfort to banks that the insured has a more secure financial position than otherwise may have been the case, which may in turn enable businesses to access additional bank finance.
  • Helps secure export business, giving confidence to explore new markets and being able to offer more competitive terms.
  • Helps free up capital for the business to use elsewhere, through a reduction in their bad debt reserve (an amount businesses expect not receive because some customers fail to pay).

• Why should businesses take out trade credit insurance

  Trade credit insurance helps businesses to safely sell more to existing customers, or expand to new customers.

• FAQ

  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.