Understanding trade credit insurance: Protection for businesses in uncertain times

By Andrew Smith, Client Director

In the complex world of international trade and business, companies face a myriad of financial risks that can significantly impact their operations and growth. One such risk is the potential default of trade partners, which can have significant repercussions on a business's cash flow and profitability. To mitigate this risk, many businesses turn to trade credit insurance. In this article, we’ll explore what trade credit insurance is, how it works, and who can benefit from this financial safety net. 

What is trade credit insurance?

Trade credit insurance (also known as credit insurance) provides protection to businesses by safeguarding them against the potential non-payment of invoices owed to them or companies they trade with. It’s particularly relevant in industries where credit sales are common and businesses operate with extended payment terms, such as:

•    Agriculture and horticulture
•    Construction
•    Financial services
•    Food and drink
•    Manufacturing
•    Oil and gas
•    Paper and printing
•    Recruitment
•    Retail
•    Wholesalers
•    Logistics/distribution
•    Textiles
•    Pharmaceuticals 

In essence, trade credit insurance safeguards companies engaged in the sale of goods or services on credit.

I want to take out a trade credit policy – what’s involved?

Before issuing a policy, the insurance provider assesses your buyers and the overall creditworthiness of your customer base. This helps in determining the level of risk associated with each buyer. Howden can help assess your risks around each client and deliver a cost-effective package bespoke to your needs. The policy cost  is usually determined by the following factors: 

•    Current credit management processes and losses
•    Client base
•    Loss history 
•    Sector

When an underwriter looks at a business to provide terms, they look at turnover, bad debt history, and the wider business sector. At Howden, we’ll always get the best terms in the market and have developed a  robust negotiation stance with the whole market to achieve this reputation for results.
Once the policy is in place, in the event of a non-payment by a customer or buyer, you may file a claim with us. We would then investigate the claim and, if valid, compensate you for the covered amount.

What else comes with a trade credit policy?

With a policy up and running, , you’re protected against the risk of non-payment due to insolvency, protracted default, or political events that may affect the buyer's ability to pay, but there are also other benefits to a taking out a trade credit policy. 

At Howden, we have an in-house team of credit analysts who help you gain that all-important competitive advantage.  Your policy  gives you an inroad  to market and sector intelligence, insolvency statistics evaluations, and customer financial analysis. Access to market insights helps you train your sales efforts on those companies that enjoy  a good reputation for paying their invoices and bills. 
 

Empower your business

Trade credit insurance is a powerful tool that helps businesses navigate the complexities of trade and protect them financially. By mitigating the risks associated with non-payment, this insurance product  provides businesses  with the confidence to engage in credit sales, fostering growth and stability in an unpredictable business environment. Whether we’re talking large corporations, SMEs, exporters, or financial institutions, trade credit insurance offers a valuable safety net for a diverse range of businesses operating in today's markets. 

If you’re interested in getting trade credit insurance via Howden, speak to one of our experts today on 0121 452 8707