Trade Credit Insurance

Trade Receivables Insurance

Scope of coverage

The subject of trade credit insurance are trade receivables resulting from the sale of services or goods with deferred payment terms. The insurance does not cover sales to individuals or to related entities or those within the same capital group.

The insurance will cover both domestic and export trade receivables.

For domestic receivables, the insurance covers the receivables including VAT, whereas for export sales, there is a possibility to insure VAT if applicable.

Generally, VAT is excluded from the insurance for export receivables.

Receivables insurance is a comprehensive solution that supports risk management in a company. It provides coverage for potential losses resulting from non-payment by the counterparty.

Benefits of having Trade Credit Insurance:

• protection against insolvency and bankruptcy of counterparties – covering most losses (excluding deductibles) in the event of non-payment by the counterparty;
• reduction of allowance for doubtful accounts – improvement of financial results;
• improvement of financial liquidity;
• enhancement of sales terms competitiveness, e.g., by extending the credit period offered – more favorable payment terms;
• improvement of sales development security;
• reduction of costs associated with verifying new counterparties - the insurer verifies the credibility of counterparties, their financial standing, and payment morals;
• risk control – the insurance company continuously monitors the insured counterparties;
• access to information about the deterioration of the financial situation of counterparties;
• reduction of business risks through support from the insurer in assessing the risk of counterparties, collection and execution of receivables – reducing the actions and costs of own collection;
• limiting other types of payment securities, e.g., guarantees, assignments, surety agreements – speeding up the sales process;
• the receivables insurance contract can serve as security for external financing (bank loan, factoring).