Trade Credit Insurance

Trade Credit Insurance protects your business when a customer buys from you on credit and then cannot - or will not - pay an insured receivable.

You sell the product. You ship it. You invoice the customer. Then life happens: bankruptcy, insolvency, prolonged non-payment, or - on some export policies - a political event that prevents payment.

Instead of your company absorbing the entire loss, the insurance policy reimburses according to the policy parameters.

The Crescendo Take: It is basically insurance on one of the biggest assets sitting on many balance sheets: Accounts Receivable. You insure buildings, trucks and equipment. The pile of IOUs from customers deserves a conversation too.

Trade Credit Insurance is not one-size-fits-all. The policy should match the risk you actually want to transfer.

• ·  Whole Turnover Coverage - insures most or all eligible credit sales across the customer portfolio.

  ·  Key Account / Named Buyer Coverage - focuses protection on selected larger or more concerning customers.

  ·  Single Buyer / Single Risk Coverage - protects exposure to one major customer or transaction when available.

  ·  Excess-of-Loss Coverage - designed for companies that retain normal bad debt but want protection against unusually large losses.

  ·  Export Credit Coverage - protects foreign receivables and may include certain political risks in addition to commercial non-payment.

The Crescendo Take: The goal is not to buy the most insurance. The goal is to intentionally decide which risk stays on your balance sheet and which risk gets shown the door

At its core, Trade Credit Insurance covers eligible commercial receivables that remain unpaid because of insured credit events.

Some policies can also be structured for special circumstances, but coverage varies by carrier. The policy language matters.

• Customer bankruptcy or formal insolvency

• Protracted default - a qualifying customer simply does not pay within the policy's required timeframe

• Certain export political risks, depending on the policy

• Covered sales made within approved credit limits and policy terms

The Crescendo Take: The product is built for the bad debt you did not plan on. If you already knew the customer was never going to pay, the carrier would understandably like to be included in that conversation before the shipment.

Trade Credit Insurance covers credit risk - not every reason an invoice can become difficult to collect.

• Bona fide disputes over product quality, pricing, delivery or contract performance

• Sales made outside an approved credit limit when the policy requires one

• Excluded buyers, industries, countries or transactions

• Invoices that are not reported or claimed within required deadlines

• Fraud, misrepresentation or internal misconduct

• Losses caused by failing to meet policy conditions

• Certain related-party or affiliated-company receivables

The Crescendo Take: If the customer says, 'We cannot pay,' that may be an insured credit problem. If the customer says, 'We are not paying because you shipped us 8,000 purple widgets instead of blue ones,' you may have a different problem.

A Trade Credit Insurance claim is a documented process, not a mystery ritual performed in a dark room at the insurance company.

• The customer becomes seriously overdue or experiences a covered insolvency event

• You Contact Crescendo and we’ll walk you through it

• Report the overdue account

• Assemble required documentation (invoices, proof of delivery, any correspondence with buyer)

• Submit the claim within the claim filing deadline (varies by policy, but typically 6 months from invoice date)

• The carrier reviews and attempt to collect for 60 days.

• If it’s a covered loss, the carrier pays the insured after applying the policy's deductible, retention, etc….

The Crescendo Take: Selling the policy is the easy part. Collecting the premium is how everyone in insurance gets paid.

But at Crescendo, we get paid to make sure you get paid.

When a legitimate claim hits, our job is to make sure the paperwork is right, the carrier is moving, and the valid claim gets paid correctly and promptly.

Because an insurance policy that looks great in a PDF but falls apart at claim time is basically a very expensive brochure.

They pay the claim. We make sure they do. That’s how we earn our keep.

The customer's debt does not disappear just because the insurer paid your claim.

After payment, the insurer receives subrogation rights - meaning it can pursue recovery from the customer for the covered debt. The carrier may handle collections directly, use outside counsel or coordinate with bankruptcy proceedings.

If money is later recovered, it is allocated according to the policy terms between the insurer and the insured.

The Crescendo take: Trade Credit Insurance paid you. It did not give your customer a coupon for free merchandise. The debt is still very much alive - it just has a much larger collection department behind it. We have essentially turned David (you) into Goliath (your customer)

The global Trade Credit Insurance market is led by several major insurance carriers, including what is known as the Big 3 who represent about 70% of the Trade Credit Insurance Market:

Allianz Trade (formerly Euler Hermes), Coface, and Atradius.

The remaining 30% of the market: AIG, Chubb, FCIA, Zurich, Mercury, HCC, Liberty, and several others. There are also a handful of new entrants to the marketplace which we’ll add to this list soon.

These companies underwrite Trade Credit Insurance policies and make decisions about buyer credit limits, coverage and claims.

The Crescendo Take.

Different insurers have different appetites for industries, customers, countries and types of risk. The "best" Trade Credit Insurance company isn't necessarily the same for every business.

Sell More | Risk Less

You can buy Trade Credit Insurance directly from some of the carriers, but many require a broker. By working with an independent Trade Credit Insurance broker you get access to all the markets, and get an advocate who represents your interests—not the insurance company's.

A specialty broker can know the market and appetite, compare costs and coverage, help structure the policy around your organizational goals and actual risk appetite. They also advocate for you when underwriting or claims issues arise.

Just as important, the lowest-priced policy isn't always the best program. Many times it is, but Trade Credit Insurance carriers have varying appetites for industries, customers, countries and credit risks.

The Crescendo Take

We were founded by a team who once worked directly for the carriers. By having multiple options, we are better able to adjust policy or carriers as the business needs change. That’s not a knock on the carriers. It’s just a business reality.

As an independent Trade Credit Insurance broker. We help businesses determine what risk should be transferred, what risk should be retained, and which insurer is the best fit.

Your goal likely isn't simply to buy insurance. It's to build a better credit risk strategy so you can.

Sell More | Risk Less.

Known by several different names… but the concept is the same.

Trade Credit Insurance = Accounts Receivable Insurance = A/R Insurance = Bad Debt Insurance‍ = Export Credit Insurance

Accounts Receivable Insurance — Insurance designed to protect a company’s accounts receivable from customer nonpayment.

A/R Insurance — A shortened term for Accounts Receivable Insurance.

Credit Insurance — A broader term commonly used for Trade Credit Insurance, although “credit insurance” can also refer to a consumer product, so B2B business context matters.

Bad Debt Insurance — A term often used when the primary objective is protection against customer bankruptcy, insolvency, or nonpayment. This is usually what someone who just took a large bad debt calls it.

Export Credit Insurance — Trade Credit Insurance specifically designed to help protect receivables arising from international sales and may include certain political risks. Buyers looking for this coverage typically are attracted by the working capital component of Trade Credit Insurance

Commercial Credit Insurance — Another term sometimes used to describe protection for business-to-business credit sales.

The Crescendo Take:

While the terminology varies, the underlying question is the same:

How much Accounts Receivable risk does your company want to retain, and how much does it want to transfer?

Protracted default occurs when a customer fails to pay an insured debt within the terms agreed upon.

Technically, a protracted default claim can be filed 1 day after the due date, but practically, they are usually filed when someone gets 60-90 days past due, depending on what the policy terms dictate.

Provide your buyers that you want insured to the insurance company along the credit limit you need and terms of sale. Underwriter will evaluate and approve, partially approve, or decline the credit limit request, with the reasoning behind the decision. Premium is typically calculated based on the projected sales to the insured customers. When a customer doesn’t pay, or files bankruptcy, a claim is filed and the insurance will reimburse you, typically 90% indemnification.

The main difference is Insurance is protection against nonpayment, where Factoring is a purchase of the Receivable and provides faster access to cash. Some factors will be without recourse, meaning you get the cash AND transfer the risk.

Another difference include who your customer would pay, where they send the money, and the cost. Factoring may have payments mailed to them, and sometimes they are the remit to party as well. Factoring typically costs between 2%-5% of sales, while insurance is typically about ¼ of 1% of insured sales.