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A Guide to Trade Credit Insurance

A Guide to Trade Credit Insurance

by | Oct 14, 2019 | Trade Credit Insurance

What is Trade Credit Insurance?

Trade Credit Insurance, sometimes called Accounts Receivable Insurance, is a method of protecting a company’s accounts receivable against the risk that one or more key customers will fail to pay for goods and services. This type of insurance covers the risk of unpaid invoices that may arise as a result of protracted default, insolvency, or bankruptcy of a customer (also known as a buyer). Trade credit insurance protects your cash flow and covers your business with your customers so that when they fail to pay you or go under, your company still gets paid.

What are the Reasons to Invest in Trade Credit Insurance?

A credit insurance policy can do more for a company than just protecting accounts receivable.

Large companies, and especially multinational entities, invest in trade credit, business credit, or export credit insurance for a variety of reasons, including:

1. Increased Sales and Expansion: When a company’s receivables are insured, they can safely sell more to existing customers, as well as expand into areas that would otherwise be too risky.

2. Improve Cash Flow: a credit insurance policy can improve your cash flow by reducing the number of days a sale can be outstanding. It also allows for the outsourcing of debt collection services at no extra cost.

3. Better Financing Rates from Your Lender: Lenders look favorably on companies that have taken the added measure of protection that trade credit insurance offers. They will typically lend more capital for insured receivables and may reduce the cost of funds. 

4. Reduce Reserves of Bad-Debt: Insuring a company’s accounts receivable can free up capital that would have originally been set aside in case the customer failed to pay. This means more liquid cash flow available for business initiatives.

5. The Protection Pays Off: Credit insurance policies may offset its own cost due to the way in which it allows a company to increase sales and profits without additional risk. In addition, credit insurance premiums are tax deductible.

Guide to Trade Credit InsuranceGet Your Free Guide to Trade Credit Insurance

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How Much Does Trade Credit Insurance Cost?

 

The credit insurance premium is calculated by using a percentage of your turnover combined with level of risk. In other words, the number depends on who you are selling to, how much coverage your company needs for each customer, customer ratings, loss history, and the business sector.

On average, a trade credit insurance premium will be a fraction of one percent of company sales. The rate can be lower or higher depending on the variables listed above.

 

What Do I Need to Know About Policy Coverage?

 

Policies are written on an annual basis and can cover risks that are commercial or political. Once the policy is set, the credit insurer will assign the policyholder’s insured customers a specific credit limit, which is the amount covered if a buyer fails to pay.

Unlike other types of insurance, a trade credit insurance policy does not get filed away for renewal next year, it is a dynamic relationship. This type of policy can continue to change over the course of the year and the credit manager will play an active role in this process.

New buyers and additional coverage can be requested if needed. In this case, the insurance company will determine whether to approve the coverage by investigating the risk.

The insurer will continue to monitor your buyers and their creditworthiness. Companies we work with such as Atradius, Euler Hermes, and Coface will gather information about your customers by a variety of methods such as public records, receipt of financial statements, and information that is obtained through other policyholders that sell to the same buyer. This will be of great value to your company because the information you can access through the insurers database will help you make smarter business decisions.

Should you need to file a claim, our team of claims professionals will guide you through the process. 

In a way, your credit insurer becomes an extension of your team. For example, if the records in the insurance carrier’s database suggest that your buyer is experiencing financial trouble, all policyholders that sell to that particular buyer will be alerted so that a plan can be set in place to avoid any losses before a claim is even filed.

 

How Do I Know Which Insurance Carrier to Choose?

 

There are many insurance carriers that offer trade credit insurance and each of them may differ in the amount that they decide to cover for your buyers, as well as their terms and conditions. Having a deep understanding of each of these differences will help you decide the best option for your company.

A trade credit insurance broker is invaluable in this process. Kirk Elken and Peter Seneca have over 35 years in the area of trade credit insurance. At Securitas Global Risk Solutions, we work for your company’s business interests, not the insurance carrier’s.

First, we work to understand your business needs and financial goals, key buyers, and credit exposures. Then, we send your policy application to multiple insurance carriers for quotes, which include buyer coverage commitments and proposed terms and conditions.

Next, we schedule a meeting to review the results. Using our knowledge of the insurance carriers, we can advise you on which policy will be best suited for you in terms of premium price, coverage, and advantages or disadvantages of working with each carrier.

After working together to elect the best policy at the most competitive price, we continue to work with and negotiate with the insurance carriers as your needs evolve.

 

Does it Cost More to Use a Trade Credit Insurance Broker?

 

There is no additional cost to you for using a trade credit insurance broker. This means that on a given insurance policy, your rate will be the same whether you decide to undertake the process alone by going directly to an insurance carrier or work with a trade credit insurance broker.

In fact, you are likely going to pay less on your premium because you have your choice of multiple carriers, rather than being locked into one.

 

Cargo Ship Export Credit Insurance

In Summary

Trade credit insurance is different than traditional insurance. It covers accounts receivable so that you can protect your company against buyer insolvency, slow-pay, and bad debt. In addition, a trade credit insurance policy is a partnership with the insurance carrier that can provide their database information and knowledge to improve your trade decisions. Companies can also benefit from trade credit insurance through its ability to affect your sales expansion to new and existing buyers.

Navigating the world of credit insurance and the insurance claims process can be complicated and challenging. Using a broker like Securitas Global Risk Solutions gives the balance of power back to the client in the form of our knowledge of the industry, our understanding of your company, and our ability to provide you the carrier that offers the best coverage at the lowest rate.

Why Securitas?

As an insurance broker rather than an insurance agent, Securitas Global Risk Solutions is able to apply to multiple carriers to find the best contract, with the most coverage, for the least cost. A carrier’s agent can only advise you as to that carrier’s specific contract. We have a team of experts who are available to you 24/7 to answer any questions or concerns. Additionally, our service comes at no charge to you.

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EXIM Bank Back to Full Financing Capacity

EXIM Bank Back to Full Financing Capacity

by | May 22, 2019 | The Export-Import Bank of U.S.

On May 8, the U.S. Senate formally confirmed three of the Trump administration’s nominees to the board of directors of the Export-Import Bank of the United States (EXIM).  The nominees include Kimberly A. Reed, confirmed as president and chairman of the board, Spencer T. Bachus III, and Judith DelZoppo Pryor.  Two additional nominees remain under consideration by the Senate.

The confirmation establishes a quorum of three members on the EXIM board of directors need for the bank to authorize transactions greater than $10 million.  EXIM had been operating since July 2015 without a full quorum and was limited in its ability to approve larger, typically long-term financing deals.

EXIM’s inability to fully conduct larger deals hindered its overall ability to support smaller transactions that typically assist small and medium-sized enterprises (SMEs) and to be self-funding—covering its operations on fees and interest it receives from its beneficiary clients.  In fiscal year 2018, EXIM reported $3.4 billion in transactions, down significantly from a high of $35.8 billion in 2015, and also forecast a $492.2 million operating deficit.  The Wall Street Journal reports that EXIM’s own internal estimates value the amount of lost transactions since mid-2015 at $21.5 billion.  While the restoration of EXIMs full financing capacity is welcome news to businesses seeking to increase American exports, EXIMs legal authorization will lapse on September 30, 2019 if Congress fails to reauthorize it past that date.

The Ex-Im Bank helps support U.S. exports through a range of programs, including guaranteeing loans to foreign buyers, credit insurance and some direct lending to foreign companies. To learn more about the range of products offered by the EXIM Bank, click here.

As a certified EXIM broker, Securitas has years of experience working with U.S. companies seeking to access EXIM’s services to help generate export-driven growth.  Offering services such as trade credit insurance and risk insurance, Securitas is able to provide these trade insurance solutions, often at no cost to the exporter, and then works with its customers structure insurance solutions that meet their goals of sustained and secure long-term growth.  In 2015, Securitas was named EXIM Broker of The Year.

Securitas is ready to help businesses, particularly SMEs interested in pursuing an export strategy, learn how to access EXIM’s services.

Links to these hearings:

EXIM Bank can get our exporters back in the game: https://bit.ly/2M3qrpY
Corporate Welfare Wins Again in Trump’s Washington: https://nyti.ms/2VW1C3z
Senate Revives Ex-Im Bank: https://on.wsj.com/2WhvhUb
The Senate is making a big mistake as it drags its feet over EXIM Bank confirmations: https://cnb.cx/2uJiAln

 

 

Guide to Export Credit InsuranceGet Your Free Guide to Export Credit Insurance

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Why Securitas?

As an insurance broker rather than an insurance agent, Securitas Global Risk Solutions is able to apply to multiple carriers to find the best contract, with the most coverage, for the least cost. A carrier’s agent can only advise you as to that carrier’s specific contract. We have a team of experts who are available to you 24/7 to answer any questions or concerns. Additionally, our service comes at no charge to you.

Contact Us Today

Securitas to Participate in EXIM Bank’s 2019 Annual Conference

Securitas to Participate in EXIM Bank’s 2019 Annual Conference

by | Mar 20, 2019 | The Export-Import Bank of U.S.

Securitas Global Risk Solutions is pleased to note that it will once again be participating in the 2019 EXIM Conference, to be held at the Omni Shoreham Hotel in Washington, DC from March 28-29, 2019.  The annual event showcases the work of the EXIM Bank and brings together over 1000 business leaders, government officials and foreign dignitaries from across the world with an interest in promoting U.S. exports.

The EXIM Bank is an independent and self-sustaining federal agency that provides a range of trade financing solutions  – including loan guarantees, working capital guarantees, direct loans, and export credit insurance – to promote the sale of U.S. goods and services to foreign buyers.  To learn more about the range of products offered by the EXIM Bank, click here.

The focus of this year’s conference will be the role of trade in promoting national security, as well as highlighting EXIM’s role in assisting American energy and manufacturing sectors.  The program will include keynote speeches, panel discussions, as well as ample networking time for participants to discuss best practices, and export opportunities.

As a certified EXIM broker, Securitas assists U.S. exporters to identify, implement and manage the appropriate EXIM export trade credit insurance program to meet their goals of sustained and secure long-term growth.  Securitas provides these services at no additional cost to the exporter.  In 2015, Securitas was named EXIM Broker of The Year.

Securitas is ready to help businesses, particularly small and medium-sized enterprises (SMEs) interested in pursuing an export strategy and learn how to access EXIM’s export trade credit insurance programs.

The Export-Import Bank of the United States and Its Future

by | May 18, 2017 | The Export-Import Bank of U.S.

The Export-Import Bank of the United States (EXIM) is the official export credit agency of the United States. Its mission is to support American jobs by facilitating the export of U.S. goods and services. It does so by assuming credit risk, primarily through two programs – extending export credit insurance for exporters and providing working capital guarantees. These programs are available to companies of any size with 80% of authorizations are to SBA defined small business.

The Current State:
EXIM is congressionally authorized through 2019. While this seems several years from now, it’s important to note the last two authorizations have been tenuous, including a period in 2015 when its charter lapsed for six months. President Obama and congressional Democrats generally supported EXIM through this period, however there was an influential group of House Republicans that held up authorization process.

In addition to upcoming the re-authorization debate, EXIM also lacks three board members. Therefore, it does not have the quorum required to approve authorizations over $10MM.

The new administration brings renewed and increased speculation regarding the future of EXIM. President Trump campaigned on a platform of reduced government and seemed less friendly toward global trade. However, he heavily emphasized his business background and experience, which included strong support of U.S. manufacturers and small businesses, both of which he believes are critical to economic growth.

Against this backdrop, members of the Securitas team attended the EXIM 2017 Annual Conference on April 7-8 to learn more about the bank’s future.

Key Takeaways:

  • 95% of global population and 80% of global GDP is outside the U.S.
  • According to the Organization for Economic Co-operation and Development (OECD), there are 32 countries with Export Credit Agencies (ECAs) that compete with the U.S.
  • Exports will become even more critical in helping the U.S. grow its GDP, reduce the debt and balance the budget.
  • In order to compete globally against China, the U.S. needs to increase its support of exports. For example, the U.S. EXIM Bank supported $10 billion in authorizations in 2015. In comparison, China supported $500+ billion in exports through EXIM-China, China Development Bank and Sinosure).
  • Jobs created by export-related business tend to pay an estimated 18% more according to the International Trade Administration.

During a panel discussion regarding the future of EXIM, congressional members Jack Ryan, R-PA and Chris Collins R-NY both indicated President Trump fully supported the bank and recognized the need to support U.S. exporters though tax policy and regulation reform. They further indicated his commitment to a fully functioning bank by filling the vacancies on its board with immediate appointment approval of three new board members.

While there is still internal debate within the Republican caucus regarding the future of EXIM, it does appear the agency has the backing of President Trump and will continue to be an important tool in the U.S. government’s toolbox to support exports.