Credit Insurance

History[edit]

Commercial credit insurance, operating credit insurance, export credit insurance or credit insurance is an insurance line and riskmanagement tool provided by commercial insurance corporations and government credit insurance institutions to corporations seeking to shield their receivables from losses due to credit exposures such as prolonged failure, liquidation or the like.

It is a kind of non-personal insurance and should not be mistaken for credit insurance or credit invalidity insurance, which an individual receives to avoid the risks of losing his or her earnings required to settle his or her debt. Credit insurance may contain a policy term insurance element provided by the same insurer to cover the risks of non-payment by overseas purchasers due to monetary problems, riots, expropriations, etc.

It underlines the important part played by commercial credit insurance in promoting cross-border commerce. Commercial loans are provided by sellers to their clients as an alternate to prepayments or C. O. D. conditions so that the client has sufficient urgency to earn revenue from the sale to purchase the products or services.

The supplier must therefore bear the default risks. Both in a given country or country and in an exported business, the risks increase if legislation, custom communication and the client's image are not fully comprehended. Besides the higher risks of non-payment, foreign commerce poses the issue of the period between the dispatch of products and their uptime.

Once the customer's debts are credit covered, the large, high-risk fortune becomes safer like an insurance policy protected property. Credit insurance is therefore an instrument of commercial financing. Commercial credit insurance is taken out by commercial enterprises to cover their claims arising from losses due to the debtor's insolvency. Commercial credit insurance usually insures a buyer fleet and provides an stipulated payment rate on an outstanding bill or claim due to prolonged defaults, receivership or liquidation.

Policyholders must use a credit line for each of their purchasers in order to insure the sale to that purchaser. Premiums reflect the credit exposure of the assured purchaser portfolios. Credit insurance may also include individual deals or trading with a sole purchaser.

Commercial credit insurance was introduced at the end of the 19th millennium, but it was mainly introduced in Western Europe between the First and Second World Wars. A number of enterprises were established in many different jurisdictions, some of which also dealt with the policy risk of exporting to their country. In 1991, following the privatisations of the short-term side of the UK Department of Credit Guarantees in 1991, the commercial credit insurance markets were concentrated and three groups now represent over 85% of the world credit insurance markets.

Atradius was later changed to Atradius after the spin-off from the Gerling Insurance Group. There have been many changes in commercial credit insurance, from cover that can be cancelled or downgraded at the insurer's option to cover that cannot be cancelled or downgraded by the insurance during the term of the contract. Whereas commercial credit insurance is often primarily known for the cover of claims from abroad or exports, there has always been a large part of the commercial credit insurance sector which also uses commercial credit insurance for German receivables underwriting.

German commercial credit insurance offers businesses the coverage they need when their client bases consolidate and large exposures arise to fewer clients. As a result, there is a greater level of credit card risks and a higher level of credit card risks if a client fails to make payments. Inclusion of new underwriters in this area has enhanced the accessibility of German insurance coverage for businesses.