By The International Credit Insurance & Surety Association
‘A consultant to alternate credits coverage’ is a reference e-book on exchange credits coverage, written from a global viewpoint. it's a compilation of contributions from a number of authors and reviewers drawn from ICISA member businesses. The booklet offers an summary of the entire method relating to alternate credits assurance, together with the background of alternate credits assurance, exchange credits assurance companies, the underwriting approach, top class calculation, claims dealing with, case reports and a thesaurus of terminology.
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Extra resources for A Guide to Trade Credit Insurance
The actual set-up and appearance may differ per credit insurer, but broadly speaking the credit insurance policy has the following parts and contents. g. broker or trade financier); • actual premium rate or amount and/or the minimum premium amount; • start and end date of the policy (policy period); 38 A Guide to Trade Credit Insurance • description of the insured’s trade activities; • covered percentage and amounts of deductibles, if any; • the longest credit period that the insured may agree with its buyers under cover of the policy; • the maximum amount that the insurer is liable to in respect of all losses during the policy period; • specification of the costs that will be charged for credit limit handling and monitoring of the buyers; • overview of buyer countries covered by the policy including any special terms and conditions for particular buyer countries; • currency of the insurance contract; • the applicable law and competent court.
An example to illustrate the difference between these two insurance types: • The policy start date is 1 January 2011 and the policy expiry date is 31 December 2011. • The policy is not renewed. • During this insurance period, the customer ships goods on: 1) 10 September 2011 (invoice due date 10 December 2011), 2) 15 October 2011 (invoice due date 15 January 2012), 3) 20 January 2012 (invoice due date 20 March 2012). • The buyer becomes insolvent on 28 February 2012. In a risk attaching policy, the credit insurer is liable for losses regarding the shipments 1) and 2), which were done during the insurance period, but not for shipment 3), which was not shipped during the policy contract.
Better financing terms – In many cases a bank will lend more capital against insured receivables and may also reduce the cost of funds. • Reduce bad-debt reserves – This frees up cash for the company. Also, trade credit insurance premiums are tax deductible, but bad debt reserves are not. • Indemnification from buyer non-payment. The process of insuring accounts receivable involves understanding a company’s trade sector, risk philosophy, business strategy, financial health, funding requirements and internal credit management expertise.
A Guide to Trade Credit Insurance by The International Credit Insurance & Surety Association