TRADE CREDIT INSURANCE
Protecting the Insured against the Risk of Non-Payment
Trade Credit Insurance provides companies that are selling their goods on credit with coverage for outstanding receivables that are within approved credit terms, protecting the Insured against risk of non-payment by its buyers!
WHAT, WHY AND HOW?
Answers to all your Questions about Trade Credit Insurance
The Policy covers loss due to any or all of the following risks:
- Insolvency of a buyer
- Non-payment or protracted default by a private (i.e. not a State-owned) buyer
- Politcal risks (only in case of overseas buyers)
- Military or civil war, revolution, riot or insurrection
- General moratorium on outward remittances decreed by the government of the buyer’s country or by any third country covered under the contract, through which payment must be made
- Any measure or decision of the government in the buyer’s country, which in whole or in part prevents performance of contractual obligations
- Political events, economic difficulties, legislative or administrative measures occurring in the buyer’s country, which prevent or delay the transfer of the sums paid by the buyer or its guarantor
- Cancellation of import license
- Default by a government-owned buyer
Significant exclusions are:
- Non-payment arising due to genuine trade disputes
- Sales to a private individual who intends to use the goods for nonprofessional purposes Cover Your Outstanding Receivables with Trade Credit Insurance.
- Sales to an associate company (Political risk can be covered in case of overseas buyers)
- Sales contracts where payment is received in advance
- Sales under irrevocable and confirmed Letter of Credit
- Loss due to foreign currency fluctuations
- Nuclear risks
- A war between two or more of the following countries: France, China, Russia, the United Kingdom and the United States of America
- You want to extend be???? er credit terms to your existing customers to increase sales to them
- You want to expand your business by offering better credit terms to your new or prospective buyers – not all the buyers agree to LCs or advance payment terms
- If you are exposed to the risk of frequent default which may affect your profitability
- If you are looking to fi nance your receivable at competitive rates
- To get better price for your goods – buyers generally factor price of confirmed LC if it is insisted upon and LC generally is costlier than credit insurance
The premium is expressed as a percentage of the insurable turnover. The premium is determined by the underwriting team and takes into account the countries in which exports are made, level of trade losses in the portfolio, risk factors of the sector.
- An amount of INR 2200, for setting up a credit limit for each of your buyers. There is an intervention fee of INR 5000 if you want us to intervene for collection of claim in case of default by a buyer
- Contribution to recovery costs is payable for each claim that the Policyholder sends to the Company, requesting intervention by the Company for recovery of debts. Debt collection services can also be provided for the debts not covered under this policy
Coverage is provided either 80% of the invoice value or 90% of the cost incurred last year by the insured, whichever is lower. Total number of invoices covered for a particular buyer would be limited to credit limit assigned to that buyer. A maximum liability is fixed under each policy. It is the limit up to which the Insurer would settle the claims under the policy.
- The policy would be a whole turnover policy covering all the buyers & countries (in case of Exports), which fall under the insurable category. The policy would be for a period of one year.
- The Proposer has to submit information on its sales and buyers in the format stipulated in the Application Form. Based on a preliminary assessment of the credit quality of the Proposer’s buyers, a Non-Binding Offer (NBO) will be made to the Proposer, specifying the part of the Proposer’s turnover that the Company is willing to insure and also the destination countries of exports (in case of exports) that the Company is willing to cover. The premium will be charged on the insurable turnover, which will be assessed based on the sales estimates provided in the Proposal Form.
- If the terms and conditions of the NBO are acceptable to the client, a detailed assessment of the Proposer’s buyers is undertaken and credit limits are assigned per buyer. The credit limit for a buyer denotes the maximum limit of indemnity that the Company is willing to provide to the Proposer for that buyer, for sales to that buyer in the ordinary course of business.