Trade Credit Insurance

Coverage that protects a seller against nonpayment by business customers because of insolvency, protracted default, or political events.

Overview

Policies typically cover a portfolio of buyers, with the insurer setting a credit limit on each customer and reimbursing a high percentage, often around 90 percent, of covered losses. Exporters use it to sell on open account terms abroad, and banks lend more readily against insured receivables. The market is concentrated among a few large global players, notably Allianz Trade, Atradius, and Coface, whose buyer monitoring makes them significant sources of corporate credit intelligence. Because insurers can cut limits quickly when a sector weakens, credit insurance can amplify a downturn, which led several European governments to provide temporary state backstops during the 2020 pandemic to keep cover in place.