How Trade Credit insurance can benefit you in 2024

Thousands of businesses have gone bust in 2023 due to challenges such as higher costs, inflation, and falling sales.¹ More firms could be set to follow suit. If your customer goes bust, you might not get paid.

Discover how trade credit insurance can help combat late payments and unpaid invoices - protecting your business from the ongoing risk of insolvency.

Chapters

0:00: Trade credit insurance explained. | 00:28: The benefits of trade credit insurance. | 01:22: The risks trade credit insurance mitigates. | 02:30: How Marsh Commercial can help. | 05:46: The difference between domestic and international trade. | 07:14: Can trade credit insurance impact business relationships? | 08:40: Advice to businesses considering trade credit insurance.

Key takeaways

1. Trade credit insurance is a policy that provides cover for non-payments, specifically when you’re trading on credit terms, for any goods or services that are rendered that you’re offering to your customers with an extended payment period.
2. It provides a safety net in the event you’re not paid for the goods or services you’ve provided – covering you against the event of bad debt. It can also be a tool for growth by enabling you to potentially trade more with some of your customers. It also instils some disciplines in your credit control procedures by helping you collect your money from your customers in a timelier manner.
3. Trade credit insurance mitigates the risk of insolvency of one of your customers. Plus, if you’re trading internationally and you’re exporting to different markets, you can get political risk cover as well, which covers non-payment for reasons out of everyone’s control – for example, civil unrest.
4. Marsh Commercial offer a unique trade credit scheme called CoverCredit. It’s underwritten by an insurer called Coface and is specifically designed for SMEs that turnover up to £10 million. It’s perfect if you’re looking to cover your whole sales ledger. It also includes integrated collections to help you collect your debt.*
5. Common exclusions with Marsh Commercial’s trade credit insurance solution - CoverCredit – are that it only covers trade on credit terms. It excludes any sales that you do on a pro-forma basis or any cash sales. The policy excludes VAT and any inter-company sales. It also excludes any sales to any government entities. Full for exclusions please get in touch.
6. Trade credit insurance works in a very similar way for domestic and international trade. The benefit of trade credit insurance internationally is that it gives you access to the underwriter that's writing that policy. They’ll have a large pool of information on companies all around the world that you would be able to tap into to get a better of understanding of your customers. That will help you to determine where you might want to put more trade or less trade or how you handle those particular situations.
7. The key to managing business relationships when using trade credit insurance is to be transparent about what you’re doing and why you’re using it. Trade credit is used internationally for trade and is common practice. It has benefits to both side of the relationship by enabling you to do more trade with your customers.
8. Trade credit insurance adds to your risk mitigation tools. It’s there to protect you and allow your business to grow in a sustainable way. If you’re considering it, it’s important to speak to trade credit insurance experts, people who know the market really well as trade credit insurance is quite niche. It’s also important to do your research on your underwriter to ensure they have a track record of paying claims, writing credit limits, and are recognised globally.

*As will all insurance policies, terms and conditions apply.