Page 70 - Export and Trade

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Trade credit insurance

By Atradius

Atradius is one of the world’s leading trade credit insurance companies with a well-proven, reputable history.
It provides in-depth market information, tailor-made credit insurance, debt collection services, non-standard
single risk cover and political risk cover to all sizes of business. It has considerable underwriting experience in
local, national, and international markets, and its highly skilled commercial team fully understand the diverse
range of trade structures and business needs within the Oceania region.

Trade credit insurance is the insurance which covers GHIDXOW WKH WUDGHU JHWV UHOLHI IURP WKH ULVN RI QRQ
the risk of non-payment of an undisputed debt arising payment.
fromatradetransactionwheregoodsorservicesare F 7R EH FRPSHQVDWHG IRU LQVXUHG ORVVHV
sold on credit terms to a buyer. Applicable to trade G 7R REWDLQ REMHFWLYH FUHGLW ULVN DVVHVVPHQW RQ WKH
transactions only,itdoesnotcoverotherbusiness buyer.
risks such as quality defects or late delivery. H 7R VHOO PRUH VDIHO\ WR QHZ FXVWRPHUV ± ORFDO DQG
Themaincausesoflossare: export.
•Insolvency. I 7RH[SDQGVDOHVWRH[LVWLQJFXVWRPHUV
•Protracted default. J 7R GHYHORS D WUXVWLQJ EXVLQHVV UHODWLRQVKLS
‡ 3ROLWLFDO ULVN H[SRUW VDOHV RQO\ K ,I QHHGHG WR DFTXLUH DGGLWLRQDO ZRUNLQJ FDSLWDO E\
using a trade credit insurance policy as collateral for
Howdoesitdifferfromothercommercial LWV EDQN ¿QDQFLQJ SDFNDJH
insurances?
Tradecreditinsuranceisadynamicinsurancewhich What is covered?
is actively and frequently applied or resorted to, when Cover against non-payment for the supply of goods or
needed. Most other insurance policies are inactive services:
until a claim arises. • Insolvency – Voluntary administration, liquidation,
Credit insurance is trade driven and therefore bankruptcy, receiver/manager appointed, agreed
performancerelated(Nosale=norisk,nopremium schemes and others.
VDYH ZKHUH PLQLPXP SUHPLXP DSSOLHV • Default – Buyer fails to pay within the policy waiting
,W KDV YDOXH DV FROODWHUDO WR ¿QDQFLDO LQVWLWXWLRQV period. This period starts from the due date.
LQ WUDGH ¿QDQFH SDFNDJHV 2IWHQ EDQNV DUH PRUH • Political Risk – Covers losses in countries other than
favourably disposed to granting working capital thesupplier’scountry,foreignexchange blockage,
loans and at more favourable interest rates when the import bans, war and civil riots, contract frustration,
downstream risk has been properly covered. public buyer default, natural disasters.
General cover terms include 85-95 percent cover;
Whygivecredittoabuyer? H[FHVV FRPPRQ VL[ PRQWK ZDLWLQJ SHULRG
• Tobemorecompetitive. to 24-month policy duration.
• To win new business.
• Toprotect currentbusinessfromcompetitors. What is not covered?
• Disputes –whereabuyerclaimsithasgoodreason
Why do traders take out cover? to withhold partial or full payment, the insurer will
D 7RSUHYHQWEDGWUDGHGHEWE\KDYLQJEX\HUVYHWWHG defer liability until there is a court judgement or
by the credit insurer to ensure the buyers are arbitrationawardintheseller’sfavouroruntilthe
FRUUHFWO\LGHQWL¿HGDQGFDQ SD\RQWLPHHDFKWLPHD buyer withdraws its objection to paying.
sale is made to them. • The Insured’s failure to perform under the contract
E 7R HQKDQFH WKHLU FUHGLW FRQWURO DQG FDVKÀRZ – includes anyone acting on client’s behalf. The
positions. By insuring receivables against unexpected insurer covers the buyer’s non- performance, not the
customer insolvencies and undue delays (protracted Insured’s.

68 NZ Export & Trade Handbook 2018