Trade Credit Insurance: How to Protect Your Export Receivables Against Customer Non-Payment

What Trade Credit Insurance Is and How It Works#

Trade credit insurance (TCI) — also called export credit insurance or debtor insurance — is a policy that compensates a business if a customer fails to pay an invoice due to insolvency or protracted default (typically defined as non-payment more than 6 months after the due date). The insurer underwrites your customer base, assigning credit limits to individual buyers that represent the maximum exposure they will cover. If you ship goods to a buyer within their credit limit and that buyer then becomes insolvent or simply refuses to pay, the insurer pays your claim — typically 85-95% of the invoice value. The mechanics require you to notify the insurer of overdue accounts within a defined period (usually 30-60 days), and the insurer then manages the debt collection before paying the claim.

Why Export Receivables Are Particularly at Risk#

Selling to overseas buyers amplifies the risk compared to domestic trade. Legal recourse in a foreign jurisdiction is expensive, slow, and uncertain — pursuing an unpaid invoice through the courts of another country can cost more than the invoice itself. Currency controls in some markets can prevent buyers from remitting payment even when they want to. Political risks — sanctions, import licence cancellations, war, or government intervention — can prevent payment regardless of the buyer's intentions. Domestic trade credit insurance covers commercial risk (buyer insolvency or default); export trade credit insurance typically also covers political risk, which is specific to cross-border transactions. For UK exporters selling into markets with less developed legal systems or political uncertainty, political risk cover can be as important as commercial risk cover.

What Trade Credit Insurance Typically Costs#

Trade credit insurance is priced as a percentage of your insured turnover — the total value of the invoices you want covered. Typical premiums range from 0.1% to 0.5% of insured turnover, with the rate varying based on: the markets you sell into (developed Western markets are cheapest; emerging markets command higher premiums), the creditworthiness of your buyer base, your bad debt history, and the overall size of your insured portfolio. For a business with £5 million of annual export receivables, a 0.3% premium would cost £15,000 per year. That compares favourably to a typical bad debt provision of 1-2% of debtors — and unlike the provision, the insurance converts that uncertain exposure into a known, fixed cost.

Key Providers in the UK Market#

The UK trade credit insurance market is served by a small number of large specialist insurers and several brokers who can access a wider range of capacity. The three largest global providers — Euler Hermes (now Allianz Trade), Atradius, and Coface — all operate in the UK and together underwrite the majority of the market. They offer whole-turnover policies (covering your entire customer base) as well as single-buyer policies for businesses that want to protect a specific large customer relationship. UK Export Finance, the government's export credit agency, provides complementary cover for markets and risks where the private market does not offer capacity. For SMEs, a specialist trade credit insurance broker is usually the best starting point: they can access multiple insurers, negotiate terms, and help with claims management.

Integrating Trade Credit Insurance Into Your Export Finance Structure#

Trade credit insurance does not just protect against bad debt — it also enables more aggressive use of other export finance tools. Banks and invoice finance providers are more willing to advance against insured receivables because their security is better. A trade credit insurance policy can increase your borrowing availability against your debtor book, improve the advance rate your invoice financier offers, and reduce the concentration risk premium your bank applies to large single-buyer exposures. For exporters using invoice discounting or factoring against their overseas receivables, insurance is often a requirement or results in materially better terms. AskBiz tracks your receivables ageing and flags automatically when specific buyer exposures are approaching levels that warrant discussion with your credit insurer.

• Trade credit insurance protects businesses against the risk of customers failing to pay for goods or services already delivered.
• For exporters selling on open account terms to overseas buyers, it is one of the most important risk management tools available.
• Typical cost is 0.1-0.5% of insured turnover — often less than the bad debt provision you are already carrying.