Trade Credit Insurance: Protecting the Insured Against the Risk of Non-Payment

What is Trade Credit Insurance?

Trade Credit Insurance is designed to safeguard businesses that sell goods on credit by covering outstanding receivables within approved credit terms. This policy protects the insured company against the risk of non-payment by buyers, ensuring financial stability and business continuity.

Risks Covered Under Trade Credit Insurance

• Insolvency of a Buyer – If the buyer becomes bankrupt or unable to meet financial obligations.
• Non-Payment or Protracted Default – When a private buyer (not a state-owned entity) fails to pay within the agreed credit period.
• Political Risks (Applicable only to overseas buyers):
  • War, civil unrest, riots, or insurrection affecting payments.
  • Government-imposed moratoriums on outward remittances.
  • Government actions that restrict contractual performance.
  • Economic crises or legislative changes delaying fund transfers.
  • Import license cancellation, preventing the buyer from receiving goods.
  • Default by a state-owned buyer, leading to non-payment.

By mitigating financial risks associated with buyer defaults, Trade Credit Insurance ensures businesses can operate with confidence, even in uncertain economic conditions.