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With the global economy still in recession, a growing number of U.S. manufacturers and distributors are looking for effective ways to protect their revenue streams. Many firms are looking to trade credit insurance to guard against the possibility of a default by their business partners — particularly those marketing their goods and services to vulnerable industries or for export.
Demand for trade credit coverage has skyrocketed in the past 18 months; but insurers are being more cautious about the credit risks they are willing to accept, and are declining a significant percentage of applications. And existing policyholders are seeing as much as 20 to 30 percent increases in their renewals while also being forced to accept larger deductibles and higher coinsurance.
Looking to effectively manage their trade credit risk portfolios, many trade credit insurers are shying away from industries most affected by the downturn, choosing rather to focus attention on smaller, less complex exposures, as well as on programs that are not concentrated around troubled industries. This shift towards more manageable risks and programs represents a significant opportunity for mid-sized businesses wanting to purchase this coverage for the first time or expand their existing credit insurance program.
In the current credit environment, trade credit insurance can provide significant benefits to a business in terms of both protecting critical revenue streams and possibly enhancing a firm's overall credit picture. With corporate bankruptcies on the rise around the world, financial institutions may view insured receivables more favorably when evaluating a company's overall credit profile and making credit decisions.
Read Trade Credit Insurance Protects Receivables and Enhances Credit Access in its entirety.
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