As senior vice president of NFP’s Trade Credit Insurance Practice, Andrew Perkins specializes in helping businesses safeguard their assets, navigate economic uncertainty, and unlock opportunities for expansion. In this Q&A, he shares insights on the value of trade credit insurance and how NFP supports its clients every step of the way.
What is trade credit insurance, and who benefits from it?
Andrew Perkins: Trade credit insurance protects a company’s accounts receivable from non-payment due to customer insolvency, protracted default or other unforeseen events. It’s used by businesses that extend credit to other businesses, whether domestically or internationally. Many sectors and industries rely heavily on trade credit insurance to safeguard cash flow and enable safe growth.
Why is trade credit insurance so important?
AP: Accounts receivable is often a company’s largest uninsured asset, leaving businesses vulnerable. Consider a scenario where a key customer files for bankruptcy without paying their outstanding invoices. Without trade credit insurance, that loss directly impacts your business’s cash flow, potentially disrupting operations or even threatening its survival.
Commercial property insurance doesn’t cover these risks. That’s why trade credit insurance is essential. It also empowers businesses to confidently expand sales by safely extending credit terms to new or existing customers.
How frequent are business bankruptcies?
AP: Due to increased interest rates and tightening bank lending standards, business bankruptcies in Canada and globally have increased dramatically in recent years. This trend is expected to continue and may accelerate if protectionism and trade wars develop with our major trading partners.
How does trade credit insurance benefit businesses beyond risk protection?
AP: Beyond protecting against bad debts, trade credit insurance opens the door to growth opportunities. For example, it enables businesses to:
- Expand sales by confidently offering credit terms to new or existing customers, including those in export markets.
- Improve financing terms by leveraging insured receivables to secure better bank advances and potentially lower interest rates.
- Free up internal resources that might otherwise be spent on collections or monitoring customer creditworthiness.
What sets NFP apart when it comes to trade credit insurance?
AP: At NFP, we go beyond simply securing policies. We actively resolve coverage challenges to ensure our clients get the most from their trade credit insurance programs. Our team negotiates directly with underwriters to secure the coverage our clients need.
Trade credit policies require frequent servicing throughout the year. Our team works closely with policyholders to keep their trade credit insurance policies up to date, optimized and aligned with their business objectives. Our goal is to help clients protect their bottom line while empowering their growth.
Are there any misconceptions about trade credit insurance that you’d like to address?
AP: One common misconception is that trade credit insurance is only for large corporations. In reality, businesses of all sizes can benefit. Small and medium-sized enterprises, in particular, often have more at stake when a key customer fails to pay. For them, trade credit insurance can be the difference between surviving a bad debt and becoming insolvent themselves.
Another misconception is that it’s complicated or time-consuming to manage. With the right partner, like NFP, policyholders get expert guidance and ongoing support, making the process seamless.
Q: Any final thoughts for businesses considering trade credit insurance?
AP: Your accounts receivable asset is vital to your business. Leaving it uninsured exposes you to unnecessary risk, especially in today’s volatile economic and political environment.
Trade credit insurance is not just a safety net — it’s a tool for growth and resilience. Whether you’re exploring new markets, expanding sales, or simply protecting your cash flow, NFP is here to help you navigate the complexities and maximize the value of your trade credit insurance program.
Now is a great time to explore trade credit insurance for your business. Contact your NFP representative to set up a short introductory call with our trade credit insurance specialists or find an NFP specialist for more information.