Credit insurance, a topic that was barely mentioned a year ago, now finds itself in the
spotlight as one of the most talked about issues for businesses.
Example of a basic credit insurance model
Knowing me, knowing you*
What suppliers and buyers need
to know about measuring risk
and managing credit insurers
Credit insurance pays the supplier for goods and services
it provides if the buyer cannot make the payment.
* For example,
please note that
the terms of each
Insurer will vary
Credit insurance is unlike other forms of insurance;
the levels of cover can be cut and withdrawn
at very short notice. The impact on buyers and
suppliers alike can be devastating; it can adversely
affect supply chain and cash flow, and the
withdrawal of credit insurance for suppliers can
also attract extra and unwelcome attention from
stakeholders into the finances of the buyer.
On the face of it, the Government’s proposed
scheme (announced in the Chancellor’s 2009
Budget) to ‘top-up’ credit insurance for those who
have had cover reduced is a welcome lifeline.
However, limitations have been expressed;
companies will only be eligible if their cover was
reduced after 1 April 2009, and even then, they
will only be able to purchase six months’ ‘top-
up’ insurance. The ability to 'top-up' has always
been available commercially, albeit at a higher
The reality for many companies is that credit
insurers are an increasingly powerful financial
stakeholder. If you are a buyer, do you know how
many of your suppliers rely on credit insurance?
If so, what is the level of cover and which insurer is the policy
with? In this context, whether ou are a buyer or a supplier or
both, what key areas should you consider to mitigate