Protect your business against customer nonpayment of accounts receivable – many companies’ largest asset.
Trade credit and political risk insurance can protect against your customer's insolvency (bankruptcy/receivership), protracted default (slow pay), nonacceptance (refusal to take goods) and political risk events.
Credit insurance is valuable, and not only for the usual goal of protecting against loss from bad debt. Many of these benefits can be quantified to offset the incremental premium spend.
Minimize the Impacts of Bad Debt
- Limit bad debts, preventing large one-time loss from the default of a key customer or upheaval in a specific market or industry.
- Hedge against the potentially adverse material effect on results of the economy slipping into recession.
- Eliminate the credit and political risk uncertainty of credit sales to higher risk foreign markets.
- More accurately forecast bad debt costs, removing variability.
- Reduce the bad debt allowance to bring this reduction back into income and allocate this reserve more productively. Self-insurance is an inefficient means to prepare for potential bad debt losses relative to well-capitalized credit insurers that can better spread the credit risk of many clients. If one of their largest clients defaults, most companies wouldn’t have reserves large enough to carry on.
Achieve Better Margins
- Improve your margin on receivables, potentially even reducing interest rates. Since lenders continue to take a conservative approach providing funding, credit insurance enhances the quality of the bank’s primary security and gives them the comfort to increase advance rates to as much as 90% of qualifying receivables. It also limits a lender’s concern with customer concentration risk. This is especially of benefit for export receivables where banks often provide little or no margining of foreign receivables.
- Credit insurance can help financing through traditional lenders, factors, asset-based lenders, securitization programs and more.
- Grow your business in even volatile or otherwise challenging markets without fear of nonpayment.
- Offering open terms to foreign clients can be a competitive advantage or necessity that can contribute to increased revenues, while letters of credit are an inefficient and expensive means of trading that tie up the operating line of the foreign client.
- Expand credit lines to new clients or clients where you may be holding down credit because of limited insight into the client’s financial strength.
- Expand into new industries or countries.
- Lower credit losses overall and gain a higher quality customer portfolio by working with a credit insurer.
- Most underwriters have on-the-ground credit risk underwriting in every major country in the world: this includes the information, systems, people and sophisticated risk management tools of the underwriter to manage and mitigate risk. NFP has an expert team of trade credit and political risk insurance service providers that are actively involved with the day-to-day operation of your program.
Grow Your Revenue
- Grow your business in even volatile or otherwise challenging markets without fear of nonpayment.
- Offering open terms to foreign clients can be a competitive advantage or necessity that can contribute to increased revenues, while letters of credit are an inefficient and expensive means of trading that tie up the operating line of the foreign client.
- Expand credit lines to new clients or clients where you may be holding down credit because of limited insight into the client’s financial strength.
- Expand into new industries or countries.
Leverage the Expertise of a Credit Insurer
- Lower credit losses overall and gain a higher quality customer portfolio by working with a credit insurer.
- Most underwriters have on-the-ground credit risk underwriting in every major country in the world: this includes the information, systems, people and sophisticated risk management tools of the underwriter to manage and mitigate risk. NFP has an expert team of trade credit and political risk insurance service providers that are actively involved with the day-to-day operation of your program.
Avoid Fallout from Political Risk
When trading overseas, certain government actions and political unrest always pose a potential threat. It’s vital to have coverage for your assets, income, properties and investments in other countries in order to grow your business with confidence. Political risk insurance protects your financial stake against government and political action, and can cover any costs incurred leading up to contract termination. As a result, your business can move into overseas markets without undue risk to your bottom line.
How NFP Can Support Your Business
A specialist credit insurance broker with underwriting experience, NFP advises clients in qualifying claims. NFP performs a thorough pre-vet process to ensure they are presented to the underwriter for best results responding to the underwriter’s inspection criteria.
NFP deals with the specialist underwriters on a daily or weekly basis and has strong senior management relationships with all markets. We ensure you are informed as to the alternatives so that you are well positioned to negotiate your renewal.
Where customer coverage is restricted due to perceived risk, NFP pursues alternative forms of one-off coverage. Where information is limited, NFP directly pursues confidential information on buyers around the world so underwriters can consider the larger limit requirements. NFP is an extension of our client’s credit department to ensure every possibility has been considered to establish coverage.
Next Steps and Implementation
The process for implementing credit protection requires the completion of a two-page application, a copy of an electronic aged trial balance and a short discussion to clarify further where credit protection may support key corporate strategies. The output is a management report:
- Pinpointing and measuring significant credit/political risks related to the largest customers
- Strategizing approaches that may allow you to avoid or minimize these risks
- Quantifying the positive consequences of additional strategic solutions to credit protection concerns.