Trade Credit Insurance

Trade Credit Insurance is a financial tool to hedge against commercial and political risks beyond a company’s control.

The policy indemnifies a seller against loss from non-payment of a commercial trade debtor.

Non-disputed accounts receivable will be paid by either the debtor or the trade credit insurer within the terms and conditions of their policy.

Reasons to invest in Trade Credit Insurance:

  1. Security in extending credit to existing customers
  2. Reduce bad-debt reserves – frees up cash flow
  3. Shareholders profits protected
  4. Sales expansion
  5. Expansion into new markets, locally and internationally
  6. Better financing terms (if required – policy can be assigned to your lender as surety)

Trade Credit insurance supplements and enhances the Credit Professionals job. It provides the right information which allows informed credit decisions to be made, thus avoiding or minimizing losses.

Close monitoring of insured buyers assists in identifying early warning signs of financial trouble.

Unlike most other types of insurance, a trade credit policy is proactively monitored throughout the term of the agreement.  Many changes can be made to the policy due to the company’s increasing / decreasing rates, terms and customer base.

Accounts receivable typically represents 40% of a company’s assets. Financial executives should weigh the cost-benefit of investing in a credit Insurance policy to assist with mitigating trade credit risk.

Many factors must be taken into consideration; size of turnover, customer quality and location, terms of payments, loss history, appetite for risk retention, policy structure and industry to name but a few. Premium rates have yet to exceed 1% with most averaging between 0.1% and 0.6%

Contact Us

 

 

We are able to alleviate the uncertainty in finding the right protection for you.

MGA Insurance Brokers specialise in the placement of Insurance Risk Services for Individuals, Group, Corporate and Association clientele.

Contact Kirstin Morley on 08 6383 2001 or Kirstin.morley@mga.com

Alternatively complete the online proposal form below.

Trade Credit Documents