PUBLISHED ON: January 28, 2015
Trade Credit Insurance Policies are designed to protect policyholders in the event that a domestic or overseas customer or financing recipient becomes insolvent or defaults upon a payment. A number of insurance companies sell this insurance to help policyholders reduce their risks in international (as well as domestic) trade. Policyholders, however, can face significant hurdles when trying to recover insurance proceeds even in the event of a covered cause of loss. We highlight here a potential challenge for policyholders and suggest ways in which policyholders can maximize their recovery in light of this challenge.According to the World Bank, “Trade credit insurance (also known as credit insurance, business credit insurance or export credit insurance) is an insurance policy and risk management product that covers the payment risk resulting from the delivery of goods and services.” Trade credit insurance, as defined in this article, refers to insurance against the failure to pay trade debts in connection with a specific transaction or a portfolio of transactions or operations. It is distinguished here from accounts receivable insurance, which is designed to protect companies against loss on receivables.