You can insure your export credit. Also called credit insurance, or trade credit insurance, the cover protects your accounts receivable from the risk of non-payment.
This is most common if your customer goes bust and fails to pay for the goods you shipped to them, but can also be caused by other political, economic and even geographical risks.
Export credit insurers usually pay out on claims for customer bankruptcy and political risks. Depending on your policy terms it can also cover other causes of non-payment. Your credit insurance does not need to apply exclusively to your overseas customers, you can also insure your domestic transactions.
How does export credit insurance work?
Export credit insurance works by giving you a reassurance that you’ll be paid. For example, if your customer files for insolvency before they have paid you, the credit insurance will cover a percentage of the amount invoiced – usually around 90%, although this will depend on the insurer and individual policy and is normally dictated by the level of risk. Your credit insurance will cover transactions you have with your specific customer over the course of a year and will help you to keep your accounts receivable secure.
Some insurers, including Atradius, will also support you with debt collection. In the case of Atradius this service is included in the cost of our Modula and Media policies and means you have a good chance of the debt being recouped without the need for an insurance claim.
Step-by-step guide to export credit insurance with Atradius
Insurance firms operate credit insurance policies in different ways. This is how credit insurance works with Atradius.
Step 1 Customer Assessment
We assess your customer and give them a risk rating, also known as a buyer rating. This indicates how likely it is that your customer will default on payment. We consider this information along with current market, economic and political risk data and then provide you with an indication of how much credit we are able to insure. We share this information with you so that you are able to make strong trading decisions based on high quality business intelligence.
Step 2 Invoice not paid – debt recovery
As soon as your invoice becomes overdue, you let us know and our debt collection department swings into action. In every case we try to recover the debt as quickly and easily as possible, preferably while retaining a good relationship with your customer. In many cases an invoice reminder letter from us is enough, although we also help organise payment plans and, if needed, will take legal action on your behalf.
Step 3 Invoice not paid – insurance pay out
If your customer will not, or cannot, pay your invoice and our Collections Team has not been able to recover the debt, we will pay out in line with your policy. We aim to do this as soon as possible and pay it direct to your account.
Types of export credit insurance
In many ways there are no specific types of credit insurance as every export situation is unique with variables including location, customer and size of risk. At Atradius, we operate a policy structure, which has the flexibility to be tailored to individual needs and situations. This includes Atradius Modula, for a turnover greater than $5m and Atradius Special Products that cover unique situations such as particularly long timeframes or projects involving multiple buyers. Atradius provides export credit insurance for businesses of every size, from large corporates to SMEs, specialising in both domestic and international trade.
Advantages of a trade credit insurance policy
A good trade insurance policy can provide many advantages beyond peace of mind when trading. For example Atradius has access to trading information on over 250 million companies worldwide, enabling us to support your own due diligence when assessing credit worthiness of trading partners. This can be particularly helpful when exploring new markets and building relationships with new customers.
In addition, many management boards require credit insurance as part of a company’s credit control processes. A robust credit insurance policy can also support access to finance and help build confidence between businesses and their banks and lending institutions.