Page 252 - India Insurance Report 2023- BIMTECH

240 India Insurance Report - Series II

Commercial credit insurance comes in many forms. Some types of policies work better for smaller
companies, some are geared to larger companies, and some are more relevant to specific transactions. It
can be classified into three groups:

1. whole turnover and specific account (one risk or debtor policy) insurance;
2. domestic and export insurance;
3. proportional and non-proportional insurance.

Trade credit insurance contracts are typically “whole turnover”, covering all of a company’s trade receivables.
By taking the whole portfolio of risks, the insurer avoids insuring only bad risks or adverse selection. Specific
account policies protect the insured against a selected group of customers (i.e., Top 10 or Top 20) or a single
transaction. Single-debtor trade credit insurance is best suited to large transactions with lengthy payment terms.

Domestic credit insurance covers only domestic turnover, unlike export credit insurance, which
provides international protection. Most insurers offer comprehensive insurance that covers both domestic
and export turnover.
In proportional insurance, the insured receives indemnification for every insured loss. The amount
of indemnification depends on the retention. In non-proportional insurance, the contract provides a
layer of protection for losses beyond a certain level (i.e., catastrophic and excess of loss insurance).
Catastrophic or excess of loss insurance is more suited to large or global organizations with more than
$100 million in revenue that have their own sophisticated credit departments. 12

The trade credit insurance market is changing rapidly. Twenty-five years ago, there were more than
35 private credit insurers operating in the EU member states. In the past two-decade, consolidation has
led to the disappearance of four larger companies: Gerling, Hermes, NCM and Euler.

Figure 2. Globalization on the global trade credit insurance market (market share, %)

Source: Own estimates.

12 Trade-Credit Insurance – A Solution for Growth, “Risk Alert”, Volume IV, Issue 2, Marsh, April 2005, p. 3.