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Trade Credit Insurance and Collections






           The contract of sale                       3URSRVHU¶V %XVLQHVV ± &XVWRPHU¶V WUDGH VHFWRU DQG
           Acontractofsaleisaveryimportantdocumentfor  the trade sector that they sell to, Terms of payment
           tradecreditinsurance.Thisisanagreementbetween  and estimated turnover.
           BuyerandSellerwhichclearlydocumentsthe     3URSRVHUVEXVLQHVVLQWKH ODVW¿YH\HDUV &XVWRPHU¶V
           obligations of both parties.               turnover experience against loss experience.
           A typical contract of sale should spell out:     'HEWRU 3UR¿OH VKRZLQJ VSUHDG RI EX\HUV
           • Registered name of buyer and seller.     )LQDQFLDO <HDU VKRZLQJ GHEWRUV DJHG DQDO\VLV DQG
           ‡ 'HVFULSWLRQ RI JRRGV VHUYLFHV  LQFOXGLQJ TXDQWLW\    'D\V 6DOHV 2XWVWDQGLQJ  '62
           ‡3ULFH  LQFOXGLQJ FXUUHQF\                 2YHUGXH$FFRXQWV±EX\HUVQDPHV DPRXQWDQG
           ‡ 7HUPV RI SD\PHQW  ZKHQ WKH\¶OO SD\       action taken.
           ‡ &UHGLWPHWKRG KRZWKH\¶OO SD\              &ROOHFWLRQVDQGVHFXULW\±RYHUGXH SD\PHQW
           •Delivery date.                            procedures.
           • Responsibilities of delivery – INCOTERMS.      &UHGLW0DQDJHPHQWV\VWHP±ZKHQLQYRLFHVDUH
           • Who is paying – may be different to buyer.  raised and how buyers are assessed.
           • When does title transfer from seller to the buyer?      0DUNHWV 7XUQRYHUE\FRXQWU\ WHUPV RISD\PHQW
           • Dispute clause.                          and days sales outstanding.
                                                       3ULQFLSDO &XVWRPHUV±WRSWHQEX\HUV
           What makes up the credit insurance contract?      6SHFLDO IHDWXUHV UHTXLUHG H J  FRQVLJQPHQW VWRFN
              *HQHUDO 7HUPV DQG FRQGLWLRQV  HQGRUVHPHQWV DQG      7KH 'HFODUDWLRQ ± LQIRUPDWLRQ VXSSOLHG LV WUXH DQG
            aPolicySchedulecontainingvariationstostandard  correct and no circumstances exist which might
            cover, and Information on which countries are  LQÀXHQFH LQVXUHU¶V ZLOOLQJQHVV WR DFFHSW WKH ULVN
            covered and on what terms.
                                                   Information-What theinsurerneedstoknow:
              3URSRVDO )RUP ± FRPSOHWHG E\ WKH ,QVXUHG  7KH
            LQIRUPDWLRQ LV WKH EDVLV IRU WKH RIIHU DQG IRU ¿QDO 3ROLF\   • Cover required by seller:
            TheproposalformisanintegralpartofthePolicy.  – Risk Horizon – the current payment terms in number
              &UHGLW /LPLW ± 6SHFL¿F LQIRUPDWLRQ RQ ZKHWKHU LQVXUHU     RI GD\V           HWF
            can cover a named buyer, on what terms and up to  ± 3ROLF\ :RUGLQJ ± VSHFL¿FDOO\ UHTXLUHG FODXVHV H J
            what amount.                                pre-credit risk.
           (Contractcanalsobedeemedto includesales   – Policy Structure required – duration, insured
           declarations upon which the amount of premium to be  percentage, deductibles.
           SDLG LV GHWHUPLQHG                      • Loss History:
                                                     ± /RVV 5DWLR  SHUFHQWDJH RI ZULWWHQ RII GHEWV
                                                     –Policyholder’sCreditManagementproceduresand
           Risk sharing options
                                                      overdues management.
           • Varying cover percentage 85 percent to 95 percent.
                                                   •Credit Limits:
           •Deductibles:
                                                     – Correct buyer entities (name, company registration
            ±(DFK (YHU\ ( ( ¿UVWORVV
                                                        QXPEHU  DGGUHVV
            –DatumLinecover.
                                                     – Quality of Buyer Portfolio (Spread of buyers/
            ±7KUHVKROG  7 +
                                                        FRXQWULHV
            ± 0LQLPXP 5HWHQWLRQ  05
                                                     – Total Potential Exposure (maximum amount to be
            ±$JJUHJDWHG)LUVW/RVV  $)/
                                                        LQVXUHG
           Documentation-TheCreditInsuranceProposal  The Credit Limit
           should contain:                         • A credit limit is the decision made by the Insurer
              3URSRVHU¶V GHWDLOV  QDPH DGGUHVV  &RPSDQ\  setting the maximum amount outstanding at any one
             Registration Number, etc.               moment in time that it is prepared to cover on a single
              :KDWW\SHRIFRYHULVUHTXLUHG"  GRPHVWLF H[SRUW   buyer for that particular Insured.
             ERWK                                  • Credit limit must be established immediately a buyer
              5HDVRQ IRU SXUFKDVLQJ &UHGLW ,QVXUDQFH  H J  EDQN   comes on board and in any event, at the latest, before
             UHTXLUHPHQW                             the date of loss. (So not essential for the insured to
                                                                      NZ Export & Trade Handbook 2018  71
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