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What Factors Affect My Trade Credit Insurance Premium Rate?

If you’re interested in purchasing trade credit insurance for risk management of your balance sheet, and to protect your accounts receivable from bad debt, and you’re wondering how much you can expect to pay, we’re here to help.

Learn more below about what trade credit insurance protects, and how much you can expect to pay for this protection, by understanding what affects your premium rates.

The Country In Which You’re Doing Business

Depending on which country you’re planning on doing business, your premiums may be higher or lower. If you’re exporting to North America to the US or Canada, for example, you’ll pay less than if you were exporting to a developing country in Africa, where the risk of non-payment could be greater.

If you work in developing countries, you may also need political risk insurance. This is a separate policy often added to trade credit insurance, to protect from political risks like violence, breach of contract, asset seizure and forfeiture, and currency problems.

The Creditworthiness Of Your Clients And Customers

If you have good internal credit control systems in place, and typically only allow trade debts for customers who have a history of paying on time, you’ll pay less for your trade credit insurance premium.

In contrast, if you work with companies who have a history of defaulting on their debts, or have poor creditworthiness, you’ll pay more for your monthly premiums. In some cases, you may not be able to insure a debt at all, as it may be too risky, and the insurer may refuse to issue a trade credit insurance policy.

Filing Political Risk Insurance Claims

The more valuable a contract or invoice is, the more it will cost to insure, because the loss for the insurance company will be greater if the company fails to pay.

Percentage Of Compensation

When a transaction falls through, your trade credit insurance company will provide you with a set percentage of its value as compensation. This can be as high as 90-100% of the value of the transaction.

However, if you want a lower premium rate, you could ask to insure only 70-85% of the value of the transaction. This would result in a much lower premium, which can enhance your cash flow – and as long as you are provided with enough compensation to stay in business, you will still be protected.

Get More Details From Niche Trade Credit Now!

This is just a high-level overview of what factors can influence the cost of trade credit insurance services. If you’d like to see an example contract, get a quote for a premium, or just learn more, we recommend you contact Niche Trade Credit right away. We’d be happy to help.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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Why Buy Political Risk Insurance?

If you’re considering purchasing political risk insurance from a private insurance company, you’re making a good long term investment in your company. Political risk insurance is a key part of risk management strategies for infrastructure developers and companies who do a lot of business in developing areas of the world.

Purchasing this type of policy from the insurance market allows you to protect yourself from political violence, upheaval, currency issues, and most other political issues that could result in a failure to deliver payment, or even a seizure of your property and assets. Why invest in a policy? For the following three reasons – and many more!

Ensure Stable, Predictable Cash Flow For Your Company

First and foremost, political risk insurance helps protect your company’s revenue, and ensure that you have plenty of reliable, working capital, and uninterrupted cash flow. Even if your company has hundreds of customers across the world, interruption of business is commonplace in emerging markets.

If you were counting on profits from emerging markets to ensure that your business can continue to expand, you may be at risk of losing this money if you do not purchase political risk insurance. However, if you do have this insurance, you can have peace of mind – and know that you will be compensated if something unforeseen results in the loss of your assets.

Avoid A Potentially-Devastating Financial Loss

Political risk insurance is particularly important for smaller companies who work in emerging markets. If you have just a few customers, or several countries in which you sell most of your products or services, political upheaval could mean that your business ends up going bankrupt, or barely has enough money to continue operating.

If the loss of a single customer, or all of the customers in a single country would be financially devastating for your company, purchasing a political risk insurance policy should be one of your top priorities.

It may cost a bit more in the short term, but if something does go seriously wrong and you lose much of your business, you will be compensated – and be able to re-prioritize, and make sure that your company is not destroyed by an unpredictable, devastating political event.

Expand The Reach Of Your Business To Developing Countries

Emerging markets are one of the best places for exporters and infrastructure developers to work. With high populations and growing disposable income even in some of the more underdeveloped areas of the world, there are always business opportunities in these markets for those who are willing to take on a bit more risk.

And political risk insurance is an ideal way to help minimize this risk when expanding to emerging markets, particularly when coupled with a trade credit insurance policy.

Your insurance policy will help protect you from any unforeseen political events, while your trade credit policy will protect you if you if one of your customers goes bankrupt or defaults on their payments to you.

This allows you to build your company more quickly, and expand into emerging markets that your competitors may be avoiding. In turn, this leads to higher profits – and a stronger, more diversified business.

Interested In Political Risk Insurance? Contact Niche Trade Credit Today!

As experienced insurance brokers in Sydney, the team at Niche Trade Credit can help you understand political risk insurance – and find a policy that’s right for your company. If you’re interested in protecting your business and your assets while working in potentially-unstable, developing markets, please contact us right away. We’d be happy to provide you with more details, and assist you in purchasing the appropriate policy for your needs.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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Does Your Business Require Trade Credit Insurance?

Trade credit insurance protects you if your clients default and fail to pay for your goods or services, and it’s a great way to protect yourself from the costs of protracted default. As a credit management tool, it’s invaluable – and it can give you peace of mind at your small business.

But is it right for your business? Learn more about this risk management tool, and see why trade credit insurance may be the best way to protect yourself from bad debts.

You Sell Most Or All Of Your Goods Or Services On Credit

Any business that sells goods on credit payment terms like Net 30 or Net 60 days knows that they are taking a risk that their customers may not pay in time. However, extending credit to businesses makes it easier for them to buy your goods and can increase your customer base.

Trade credit insurance is a great way to balance the benefits of selling on credit with the risk that your customers fail to pay according to your terms. If a customer doesn’t pay and defaults on their purchase, your insurance broker will compensate you for the loss. 

You’ll Face Difficulties With Working Capital If Customers Fail To Pay

If you work mainly with just a few large companies and provide them with large credit limits, for example, and one fails to pay or defaults, you could face a serious cash crunch that may result in cash flow and working capital difficulties – potentially leading to layoffs, business slowdowns, and other issues.

You Want A Safety Net To Protect Your Accounts Receivable

Your credit portfolio is a great asset – and if you are worried that it’s not protected from customers who may fail to pay, an additional layer of protection from a trade credit insurance policy is a fantastic choice. 

You’ve Had Problems With Corporate Debt Collection Services In The Past

Debt collection is not easy in a corporate setting. If a company goes bankrupt or simply disappears, you may not be able to recover the cash you need – even if you hire an experienced corporate debt collection service.

But with trade credit insurance, your insurance broker is responsible for going after bad debts. You don’t have to worry about it – you’ll be compensated for your loss, and you can continue operating your business normally.

Your Business Works In Countries With Political Risks

Political risk coverage is a common add-on to trade credit insurance policies. It protects your company in the event of civil unrest, civil war, banking and monetary issues, regulatory changes and other political risks that may cause your business partners to default on their payments. 

Learn More About Trade Credit Insurance From Niche Trade Credit Now!

If you run a small business and you’re interested in learning more about how trade credit insurance can protect your company, contact Niche Trade Credit right away. As a leading trade credit insurance broker in Australia, we’re always here to help. 

We have decades of experience working with companies of all sizes in Australia – and we can help you find the trade credit insurance policy that’s right for protecting your business. So don’t wait. Get in touch today on 02 8416 0670.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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Our Tips For Filing Political Risk Insurance Claims

Political risk insurance is a tool that’s extremely useful for any company doing business in an emerging market, where there is a risk of political violence, or other types of upheaval that could result in a loss of property, investment, or assets.

Many different financial institutions and insurance companies offer political risk protection. And, whether you already have a policy or you’re thinking about investing in this product, you may be wondering what it’s like to file a claim. In this quick post, we’ll discuss three of the top tips we have for filling your claim, so you’ll know what to expect.

Know Your Policy (Before You Have To Use It)

The exact coverage that you receive will depend on the policy you have purchased, and the phrasing and language in which it’s written. We highly advise that you have a competent professional look over any policy that you purchase. What coverage will political risk insurance include? Here are a few of the most commonly-covered events:

  • Political violence, such as rioting, insurrection, civil war, terrorism, war, etc.
  • Governmental expropriation and confiscation of private assets
  • Government frustration, rejection, breach, or repudiation of a contract
  • Wrongful calling of letters of credit
  • Business interruption
  • Currency issues, including inconvertibility or inability to repatriate funds to your country

You should have a good understanding of what your policy covers, to ensure you file a claim at the right time.

For example, your policy might cover you if an attack on an oil rig by a militant group results in its loss – but not if political unrest causes a drop in the oil commodity price. It all depends on your policy.

Get In Touch With Your Insurance Company As Soon As You Can

Keep a close eye on the political situations in the countries in which you’re doing business, and contact your insurer as soon as you notice any issues that may result in the need to file a claim. The sooner you file a claim, the sooner you can be compensated.

Be Prepared For A Lengthy Review And Approval Process

Sometimes, your situation will be very clear-cut. If a government seizes your assets and facilities, for example, and this is confirmed, you likely will be compensated quite quickly. But, given the murky nature of political unrest and violence, things are not always so clear. The process of reviewing and approving an insurance claim can take some time. Be patient, work with your insurer, and provide them with everything they need to help speed up the process.

Let Niche Trade Credit Help You Find The Right Policy And Insurer!

As experienced insurance brokers in Sydney, Niche Trade Credit can help Australian businesses get the political risk insurance coverage that they need to protect themselves from political violence, seizure of assets, and other such risks.

If you’re interested and would like to learn more, please contact us right away. We can answer any questions you might have, and help you understand more about this unique type of risk protection insurance.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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What Does Export Insurance Cover?

Business owners who work in the import and export trade, or regularly export shipments to international customers may not be fully covered by their current business insurance, should something go wrong with the shipment, and the sale or export of the goods cannot be completed, or the customer fails to pay.

Will traditional business insurance cover this loss? In most cases, no. While you may be protected from loss or damage of your goods, you’ll need a special type of insurance coverage to protect your accounts receivable from non-payment – export insurance, also often known as trade credit insurance.

Wondering what export insurance covers, and if you need it for your company?

Export Insurance Is Not The Same As Marine Insurance Or Cargo Insurance

If you are running an import and export business, and you have cargo insurance or marine insurance, you may be wondering if you really need trade credit insurance – aren’t you covered for most situations that could happen on the ship that’s carrying your goods?

Yes, marine insurance covers the loss and damage of ships and cargo – and more specifically, cargo insurance provides full coverage for any commodity or damage that occurs the items during shipment.

But protecting your goods while they’re in transit to their destination is only part of the puzzle. What happens if your goods are delivered to the destination safely and you’re notified that they’ve been delivered – and your customer doesn’t pay? 30 days go by. 60. 90. 120 – and no notice of payment.

Then, it turns out that political instability or corporate insolvency has affected your customer’s ability to pay. Essentially, you’ve lost the sale – and if you’re lucky, you might get your shipment back, but this is not guaranteed. What recourse do you have to get paid?

If you don’t have export insurance, you don’t really have any options. You have to take the loss. But if you do have this insurance, you can file a claim – and be compensated for the loss, by your insurance provider.

Export Insurance Protects Your Accounts Receivable From Default

You can think of this insurance as a way to insure you from risk when offering trade credit to your buyers. Trade credit is a great way for businesses to sell their products more flexibly – but when you extend a line of credit to any company, you’re taking a risk, particularly if it’s a large line of credit, a newer company, or even an established company in a politically-unstable region.

If you want to protect your accounts receivable, and make sure that your business is not heavily affected by a particular customer defaulting on their debt, you can carry an export insurance policy. Then, if you cannot get payment from a customer – due to financial insolvency, protracted default, or the bankruptcy of their company – your export insurance will cover your loss.

Political risk insurance is another important part of international trade insurance. Often bundled with the export policy, it protects your company if political turmoil, such as social unrest, currency problems, or expropriation result in the loss of a sale.

How much does export credit insurance cost? Insurance cost depends on a variety of factors. Although you can insure a single transaction, you will typically insure a large portfolio of buyers, and the insurance company will pay a set percentage of any invoice or receivable that is unpaid. Your premium rate will reflect the average credit risk of your buyers – and the amount of coverage you request.

In general, it’s a good idea to have this type of  insurance – exporters, in particular, should make sure they’re covered, if they often extend long credit terms to customers, or work with more recently-established companies that could carry the risk of defaulting.

Get Your Policy Today!

At Niche Trade Credit, our company is an ideal choice for export insurance and trade credit insurance. With great service and reliable rates, we’ve helped insure hundreds of Australian companies. If you have more questions or would like to enquire about our rates and services, please feel free to contact us right away.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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How to Protect Your Business from Bad Debts

As a business owner, you know how crucial it is to protect your business from bad debts and ensure positive cash flow. Cash flow issues and the debt that they cause is the number one reason that Australian companies fail. How can you protect your small business from bad debts and unpaid invoices? Here at Niche Trade Credit, we’ve been helping business owners in the Sydney area protect their companies from insolvency and debt collection with insurance solutions. In today’s article, we’ll explore the different ways you can protect your business from an unpaid debt.

  1. Credit Applications

You don’t want to have to deal with chasing after customers over unpaid invoices. The first step to reducing your risk of bad debts and experiencing future cash flow issues is to have every new customer fill out a credit application form. A credit application form should include the following information:

  • Their full business details.
  • Trading name and ABN.
  • How long they have been in business.
  • If they have any credit guarantors.

Consider asking for and contacting bank references, and any details of the new customer’s suppliers. You could also require the customer to sign a director guarantee. Be sure to check if the customer’s business is registered with the Australian Business Register.

  1. Conduct a Thorough Credit Check

If you need to extend credit to a new customer, it’s critical that you conduct a thorough credit check. Many reputable agencies conduct credit assessments. The cost of a credit check will depend on how much information you are looking to gather. You can also find a lot of information about a potential customer and their trustworthiness via online, third-party review sites.

  1. Impose Clear Credit Terms

Most businesses use a standard 30-day term for credit, but you’re free to impose any conditions you like for your business. Make sure that the conditions you impose are clear, in writing, and that all parties involved understand their obligations.

When setting the terms, make sure to include:

  • The credit limit
  • Late-payment interest

Companies usually review the terms as the relationship with the customer evolves. It’s reasonable to give flexibility to older, valued customers as opposed to new customers.

  1. Invoicing

When you invoice customers, make sure that your instructions are clear, and that no room within the invoicing instructions would give customers an opportunity to delay payment. For example, entering the wrong amount for payment, or failing to include important bank details can lead to a delay. An airtight invoice can help you avoid this risk, and always make sure to invoice promptly and send any follow-up reminders if needed.

  1. Debt Collection

Partial payments or even late payments are better than no payment or the added expense and stress of legal action. If a customer is failing to honor an invoice within the terms they’ve agreed to honor, the first step you’ll want to take is to send them a letter of demand. In the letter, offer a payment plan via installments as an option. Getting the customer to agree to an installment plan and honor their commitment is far less stressful than taking legal action.

However, sometimes it’s not possible to get a customer to agree to installments. If this happens, you can hire a debt collection agency or take further legal action. Before you commit to either option, you’ll want to weight the costs of these services vs. the chances of recovering the debt from the customer.

For added peace of mind, you can always purchase a tailored trade credit insurance policy for your business. This insurance will cover part or all of your accounts receivable depending on your needs. In the event of non-payment, your cash flow is protected with this policy. At Niche TC, we’ve been helping business owners protect their cash flow from insolvency through insurance solutions. Please contact us today to speak to one of our brokers about trade credit insurance services.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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What Is Whole Turnover Trade Credit Insurance? Do I Need It?

If you’ve been looking into protecting your balance sheet with trade credit insurance, you may be wondering what it means to purchase a “whole turnover” policy. What does whole turnover cover? What does it mean? Can it protect my cash flow? In this brief blog, we’ll answer all of those questions, and more! Let’s get started.

Whole Turnover Trade Credit Insurance Covers All Of Your Accounts Receivables

Up to a certain credit limit, whole turnover credit insurance will provide a percentage of coverage for your entire balance sheet.

These discretionary limits and the percent of cover that a trade credit insurance coverage policy offers are set when you purchase your policy.

As a rule, the higher the percentage of accounts receivables, the higher your premium will be. The same is true of each buyer covered – higher credit lines and higher invoices will mean a higher premium.

What this does is protect you from bad debts. Insured turnover means that, if your export trade company is not paid by a particular company, you can still recover funds, up to the limit set by your policy. This preserves your cash flow, and allows you to continue operating, even if a customer defaults.

Do I Need Whole Turnover Trade Credit Insurance?

This really depends on how many clients you have, how reliable they are, and their payment history.

In many cases, it may make more sense to simply cover individual clients or transactions with their own trade credit insurance policy. This is very common, and often done for particularly large sales, or when selling to companies that are new to the industry, or located in unstable nations.

Most often, whole turnover trade credit insurance policies are used for those who engage in wholesale trade or international trade with just a handful of large clients. These policies are the most valuable for companies who would face serious financial difficulties if any of their large clients fail to pay, or fail to pay in a timely manner.

So, if you tend to work with a large volume of companies and have smaller transaction amounts, you may not need whole turnover trade credit insurance. But if you work with just a few large companies, and you would have cash flow difficulties if any of these companies defaulted, you may want to consider whole turnover trade credit insurance.

Learn More From Niche Trade Credit Now!

Niche Trade Credit specialise in trade credit insurance services and whole turnover insurance. We can provide you with a reasonably-priced policy that will protect your company, and give you peace of mind. Contact us now to learn more.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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What Is Political Risk Insurance? What Does It Cover?

Political risk insurance is a unique subset of private insurance, used to cover infrastructure developers, importers and exporters, and other such companies from financial loss, due to the forced abandonment of a project or a client due to political instability, such as government action, political violence, and other political events that occur in a foreign government.

Often, this type of insurance is bundled with trade credit insurance, which is a type of insurance that covers the costs associated with a customer not paying their invoices, due to default or bankruptcy.

Curious to learn more about political risk insurance and what it covers? Read on, and learn everything you need to know.

What Coverage Does It Include & Exclude?

The coverage that your insurance will offer depends on your insurance company, and your policy. However, as a rule, most companies in the insurance market will offer political and economic risk insurance for the following events:

  • Political violence – This includes things like armed revolution, insurrection, war and civil war, terrorism, and other such political instability that can stop a project or a sale to a foreign country.
  • Governmental expropriation or confiscation – Should your property or project be confiscated by the government, political risk insurance can be purchased that will cover the cost of this confiscation.
  • Government repudiation or frustration of contracts – Most of these policies include provisions that cover costs if a government claims that a contract cannot be carried out, or unforeseen events lead to contract frustrations.
  • Wrongful or improper calling of letters of credit –  If a government or foreign financial institutions wrongfully call in a letter of credit, or another on-demand guarantee, insurance can cover the associated costs.
  • Business interruption – The costs of business interruption during a political event or other unforeseen circumstances can be covered by a political risk insurance policy, ensuring steady cash flow.
  • Inability to repatriate funds or convert foreign currency – If banking and currency issues, such as hyperinflation or a ban on moving currency to foreign countries results in the inability for your company to be paid, your policy will likely cover these costs.

Though other types of coverage may be offered, these are the most common. Often, you’ll have the ability to choose between each type of coverage, or purchase a policy that includes coverage for all major political risks.

Why Is Political Risk Insurance Important?

Because it helps you ensure long term success when working in emerging markets. It’s usually not necessary when working in OECD countries, and with companies in very stable countries – but it’s absolutely essential if you want to expand your reach, and work in countries that are not yet fully developed.

In the rare case that political instability results in a serious financial loss, your insurance company will step in, and compensate you for these lost funds – which ensures that your business can survive, even if it loses some of its biggest customers. This gives you peace of mind when working with customers and companies in developing countries.

Learn More From Niche Trade Credit Now!

Niche Trade Credit are experts when it comes to trade credit and political risk insurance. We can ensure that you have the right policy, and are protected from any political risks in the countries where you sell your products or services. Get started by contacting us right away. Call 02 9416 0670.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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What is Export Insurance, Who Needs it and Why?

Export credit insurance (ECI) is a type of trade credit insurance tailor made especially for exporters of goods and raw materials. International trade with foreign buyers is often a complex undertaking. Niche Trade Credit (NTC) offers policies with the export trade in mind. Payment risk associated with shipping raw materials and products to customers can represent a real danger to an otherwise well-managed import/export firm or similarly situated business.

There are several common reasons why payments for exports are not made. Our insurance product is specifically designed to hedge against these risks. ECI incorporates the value of our other offerings such as political risk insurance or trade credit insurance but limits the scope to exports. The coverage allows more versatility and specificity for those who wish to limit their exposure while controlling the costs. You can rest assured that the trust you place in a foreign buyer is well insured with NTC.

If you are considering exporting to a foreign market, NTC encourages you to consider some key points;

  • Does the buyer prefer to trade on open accounts or a documentary trading basis instead of a letter of credit?
  • How stable are the import and/or export licenses?
  • What is the likelihood of contract repudiation?
  • What is the probability for the rejection of goods?
  • Have you considered non-payment for reasons of government intervention associated with political risk?
  • What is the financial health, history and credibility of the importer?

Any one of these factors, among others, can spell disaster for an exporter. Shipments of products or raw materials often represent a concentration of capital. Depending on the complexity or rarity of the products, a supplier could conceivably be wholly depending on payment for a single shipment to remain viable.

Australia’s largest export is iron ore making it the world’s leading exporter at 58%. China leads the world for iron ore imports at 57.1 billion per year. The trend to export into markets subject to lacking infrastructure and alien regulations only serves to aggravate the risks. With prices of livestock flat lining globally, Asian markets represent an opportunity for growth as well. The danger to stable import and export licenses is historically high in this region. Ever changing regulations, politically motivated or genuine, also represent instability for exporters.

Export trade represents opportunities for growth in an ever more competitive global market. Failing to factor the risk has cost many companies more than they could afford. If you export to companies without letters of credit, we suggest you make a call to NTC as soon as possible to discuss a policy that is right for you. ECI does more than mitigate the risks associated with nonpayment, refusals and other threats to your accounts receivables. It is also a powerful sales tool helping to instill confidence in potential foreign trading partners. Additionally, ECI is often a prerequisite when seeking financing for export operations and related infrastructure. The key is to balance the risk and the cost expertly. Varying levels and types of specific coverage to successfully mitigate risk but remain highly profitable is a challenge we at NTC pride ourselves in meeting. The goal is to offer the minimum cost for the greatest risk mitigation.

The need and utilisation of export credit insurance brokers is becoming more relevant each day. Policyholders for credit insurance are projected to grow in 2018 by 3.2%. Some of the reasons for the increased use of this product are clear;

  • It allows for competitive new account terms despite the risk of nonpayment by foreign buyers.
  • Reduced risk of non-payments equates to increased sales and market opportunity in volatile regions.
  • ECI can increase borrowing and lending capabilities for exporters doing business in foreign and emerging markets.

If you are an exporter the opportunities can be lucrative and numerous. Yet, the risk also increases with your export exposure. Our professionals advise exporters to keep the following checklist in mind to mitigate that risk;

  • Define the areas where you incur export risk.
  • Develop a risk management matrix by listing the risks and management strategies.
  • Discuss your risks and strategies with colleagues, financiers and NTC.
  • Review your export risk management profile regularly.

Export Credit Insurance by Niche TC

NTC is waiting to find the policy right for you. We consider many factors when proposing ECI. Our goal is to offer the best policy for your situation. These can vary by term length, risk, experience level of the exporter and more. The cost associated with ECI is often less than the price to secure letters of credit. Contact us today and we will work hard to craft the policy that best fits your business.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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Trade Credit Insurance Vs. Export Insurance

Whether you are an importer or exporter, or you commonly provide goods and services to companies in foreign countries where political risks and other issues may present risks to your cash flow, proper insurance is critical for risk management.

If you work with a company and they fail to pay on your stated credit terms – like net 30 days – the impact to your accounts receivable and cash flow can be devastating, particularly for smaller firms. That’s why you need to protect your credit portfolio from bad debts.

But you may not be sure what type of insurance is right for you. Is export insurance what you need? What about trade credit insurance? In this article, we’ll explain everything you need to know.

Export Insurance & Trade Credit Insurance Are The Same Thing

While this may be confusing, it’s true. Trade credit insurance and export insurance are just two terms that insurance companies use for the same product.

Why are there two names for trade credit insurance? Mostly due to regional differences. Insurers in many different countries offer this type of policy, so it’s only natural that there would be a few terms used to mean the same thing.

Both types of insurance work the same way. Export insurance, like trade credit insurance, protects your company from bad debt and protracted default. You insure your accounts receivable with a policy, and then if a company does fail to pay, your insurance company will attempt to recover your money with a debt collection service.

If it is not possible to recover funds within a specified period of time – such as 6 months – you’ll be compensated by your insurance company, and you’ll receive between 70-95% of the value of the unpaid invoice, based on the terms of your policy.

Typically, you’ll need to implement some credit control terms when you get a trade credit insurance policy, and do things like implement a credit limit for each customer. This helps reduce risk, both for you and your insurer.

Why Should I Get An Insurance Policy?

So, why should you think about getting a trade credit insurance/export insurance policy? Here are just a few of the reasons that companies which sell to international buyers invest in coverage from an insurance company.

1. Safeguard cash flow – Trade credit insurance allows you to get compensation even if your customers don’t pay, which helps preserve your capital and cash flow, even during protracted default.

2. Sell to new customers – With trade credit insurance, you can sell to new customers in different countries while minimizing your risk, and you do not have to deal with cash settlements, and can instead extend standard credit terms, like Net 30 days.

3. Costs of recovering debt are covered – Your insurer will always try to recover debt from a non complying company before issuing compensation, and the costs of attempting to recover debt are included in your policy.

Learn More About Trade Credit Today!

If you would like to increase your market knowledge and get more information about credit management and trade credit / export credit insurance, contact Niche Trade Credit right away. As a leading trade credit insurance broker in Australia, we can tell you everything that you need to know.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.