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Is your Trade Credit insurance recession-proof?

AIG's Sharon Giddings looks at the role of non-cancellable Trade Credit policies.

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Trade Credit Insurance

Protecting the receivables book.

Most businesses wouldn’t hesitate to protect tangible assets like buildings, machinery and stock. But the impact of payment default by one or more key customers can be just as devastating.

AIG offers solutions that help businesses take control of their valuable accounts receivables book and trade with the certainty that failure by a large customer won’t mean disaster for them. Our solutions include policies that insure all or part of the receivables book.

Product Details

Operational and structural support for self insured credit risk through Excess of Loss coverage.

 

Who is it for?

 

Companies with turnover in excess of £50m.

See our Risk Appetite

Features & Benefits

  • AIG's Excess of Loss policy structure recognises the need for a policy holder to retain risk for their own account
  • Self-insured bad debt reserves can be better managed by using Global Limits Manager
  • Global Limits Manager can automate handling of administrative problems for Captive managers who have in the past been reluctant to set credit limits/reserving structures
  • Efficient Captive management can be the first step towards structured financing secured upon trade receivables

Cover for non-payment due to the insolvency or default of both domestic and export buyers.

 

Who is it for?

 

Companies with turnover in excess of £25m selling on short credit terms.

See our Risk Appetite
 

Features & Benefits

  • Cancellable or Non-Cancellable credit limits can be considered depending on the policy structure
  • Aligns the interests of both parties with an appropriate level of Aggregate First Loss
  • Supports existing Credit Management procedures through the use of a discretionary limit, without the need to outsource all credit limit decisions
  • Tailored solutions to address specific requirements
  • Lower policy administration
  • No separation of risk and commercial underwriting allowing direct access to the decision maker
  • Global Limits provides an online platform for credit limit management
  • The policy can be enhanced with Global Limits Manager, which provides up to date receivables portfolio management and risk insight
     

Cover

Optional Services

  • Debt Collection services are available but not mandatory
  • The waiting period on protracted default claims is shorter when collection services are used by the insured

 

Cover for losses arising from non-payment of Letters of Credit or other eligible transactions with named obligors.

 

Who is it for?

 

Banks.

Features & Benefits

  • Cover is provided for losses arising from non-payment of eligible transactions due to insolvency or non-payment by a bank obligor or failure of an exchange authority (central bank etc.) in the obligor bank’s country to transfer foreign currency in repayment of a covered Letter of Credit
  • Allows banks to minimise risk to emerging market banks
  • Enables banks to increase internal limits on markets / obligors, supported by insurance
  • Allows banks to process large volumes of trade Letters of Credit, issued or requested by their correspondent banks overseas  

Excess of Loss cover for non-payment due to the insolvency or default of a buyer, or inability to transfer currency due to a political act. Non-Cancellable Buyer and Country limits available providing greater contract certainty.

 

Who is it for?

 

Companies with turnover in excess of £50m selling on credit terms of up to 180 days.

Features & Benefits

  • Cancellable or Non-Cancellable credit limits can be considered depending on the policy structure
  • Aligns the interests of both parties with an appropriate level of Aggregate First Loss
  • Supports existing Credit Management procedures through the use of a discretionary limit, without the need to outsource all credit limit decisions
  • Tailored solutions to address specific requirements
  • Lower policy administration
  • No separation of risk and commercial underwriting allowing direct access to the decision maker
  • Global Limits provides an online platform for credit limit management
  • The policy can be enhanced with Global Limits Manager, which provides up to date receivables portfolio management and risk insight

Cover for failure of a supplier to export commodities paid for in advance by the insured.

 

Who is it for?

 

Banks, trading or manufacturing companies.

Features & Benefits

  • Cover is provided for losses arising from the failure of a supplier to refund an advance payment following non delivery of a commodity due to insolvency, protracted default, or political risk
  • Minimises the financial impact to an importer should a key supplier fail
  • Can be tailored to suit the needs of both hard and soft commodities in relation to the production or agricultural cycle
  • Not limited to cover on advance payments only, but also non delivery of commodities under a barter trade agreement
  • Combined with customer default cover, it provides full supply chain protection from product source to end customer  

Key customer cover for non-payment due to insolvency or default of buyers above an agreed level for both domestic and export buyers.

 

Who is it for?

 

Companies with turnover in excess of £15m selling on short credit terms.
 

Features & Benefits

  • Written Credit Limit for all customers whose credit balance exceeds the agreed Principal Customer level
  • Up to 90% indemnity for protracted default, insolvency or political risks (optional)
  • Policy options are available with or without a deductible and with Cancellable or Non-Cancellable Credit Limits
  • Global Limits provides an online platform for credit limit management
  • The policy can be enhanced with Global Limits Manager, which provides up to date receivables portfolio management and risk insight

Cover

Optional Service

  • Debt Collection services are available but not mandatory
  • The waiting period on protracted default claims is shorter when collection services are used by the insured
     

Benefits

Who are your customers?

With business being conducted on an increasingly global scale with overseas networks of customers and suppliers, it can be much harder to get an accurate view on what buyers are up to, who they are exposed to and consequently much more difficult to get a sense of their financial security.

Staying competitive

To compete, businesses have to offer flexible and competitive terms to their buyers, but that means running the risk that they don’t get paid. Bad debts, while part of the cost of doing business, can put a company’s financial future at risk.

Related Documents

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