Preventing the occurrence of non-payment is crucial and necessary for the business of any company, whether at home or abroad.
An essential prevention tool, as well as an extremely effective solution to support its credit management processes, is Credit Insurance.
Area Brokers Industria monitors receivables and exposures to debtors and protects businesses from the risk of non-payment. In addition, thanks to a Team of experts and professionals in the field, it is able to offer customized insurance solutions for large, medium and small businesses.
CREDIT INSURANCE: HOW IT WORKS
The issue of the use of credit guarantees has taken on particular relevance and sensitivity on the part of Enterprises in light of recent events.
The increase in insolvency situations, makes it necessary to deal very seriously and competently with the policy of commercial credit risk management, within which, however, the insurance tool could be for the company, a valuable support for the management of the business in greater serenity.
The Credit Guarantee with the advent of Basel II, and now Basel III, is an important tool to improve the Rating’s standing with Lending Institutions.
Area Brokers Industria has a service that can provide assistance both domestically and internationally.
MAIN SERVICES RELATED TO CREDIT INSURANCE
- Profile study and Risk management;
- Analysis of documentation, contracts and exposures;
- Development of customized insurance programs;
- Placement of insurance programs in International markets as well;
- Study of hedges related to Political Risk.
In detail, we delve into the various steps and actions involved in this type of policy.
Risk profile analysis
- Analysis of commodity sector and risk profile
- Ongoing roofing verification
- Analysis of customers with greater exposure
- Analysis of claims in recent years
- Ongoing program analysis through the preparation of diligence
- Identification of areas for improvement
- Start remarketing activities renewal negotiation with current insurer
- Negotiation with insurers
- Presentation of remarketing results to the Client
- Identification of the partner that best meets the Client’s needs
- Defining an insurance program
- Order of coverage and request for documents from Insurers
- Control and forwarding of policies to the client
- Training for proper policy administration through periodic meetings for in-depth discussion and analysis of concerns
- Accompaniment in claims handling with guidance and suggestions on the proper drafting of claims reports
- Analysis of exposures with periodic review/comparison with Companies
- Update on market news and regulations
MAIN ADVANTAGES FOR THE ENTERPRISE THAT TAKES OUT CREDIT INSURANCE
- protect themselves from credit losses by transferring the risk to another party (the insurer);
- Ensure risk transfer at a certain and defined cost;
- Increase one’s credit rating or solvency-reliability rating;
- Facilitate access to bank credit;
- make himself economically more stable and more attractive to those with whom he intends to
Undertake business relationships;
- Have a continuous assessment of their customers;
- Prevent insolvencies in the case of openings to unknown customers, new business or new markets;
- Increase business by expanding the customer base;
- Improve the quality of receivables on the balance sheet and, therefore, working capital;
- Accelerate the process of credit collection and recovery worldwide;
- Improve and simplify internal credit management processes.
Credit insurance integrates and supports the entire credit management process and allows the insured company to benefit from three services, different from each other, within the same contract:
- Prior assessment of debtors;
- insolvency insurance;
- debt collection.
HOW MUCH DOES CREDIT INSURANCE COST
In order to calculate the annual credit insurance premium, one starts with the “insurable” turnover, i.e., the turnover from sales made on credit and to other private entrepreneurs, and then considers the product sector in which the enterprise operates and other factors such as countries, market and reference rate, and duration of risk.
Starting with this initial estimate, the policy is then customized based on the needs and conditions of the individual company, from which the final cost is also derived.
OTHER TYPES OF POLICIES SIMILAR TO CREDIT INSURANCE
- Excess of Loss: dedicated to medium to large-sized companies, does not provide credit facilities. The insured agrees with the company on the limits of the foreseeable indemnities, defining an overall deductible, a deductible for each claim, and the maximum limit of indemnities per year; it has the advantage of guaranteeing autonomy to the company in risk management, with the possibility of working out various insurance formulas;
- TOP UP guarantee: complements traditional coverage and consists of a ceiling of additional indemnities to be used for exposures that are not fully guaranteed. The TOP UP guarantee, taken out by an insurer other than the one granting the basic credit facilities, covers required amounts that exceed the credit facility granted by the first-tier insurer and is an additional guarantee to cover the company’s turnover in the event of default by one of its debtors.
- Single Risk Export: allows the insured to cover, for commercial and political risks only, even a single buyer or a limited number of foreign buyers.
- Top Account: allows a company to protect itself against trade credit risk only for the portion of turnover related to customers deemed strategic.
- Political Risk or Country Risk: provides for the extension of coverage to cases of non-payment generated by, for example, war, insurrection, natural disaster, revocation of import licenses, nationalization or confiscation.
WHY RELY ON AREA BROKERS INDUSTRIA
Credit risks are common to all business sectors, so every business needs adequate coverage. Area Brokers Industria supports all companies that take out such a policy as a synonym of seriousness towards the client. Our specialists can recommend the best policies for every need.
Area Brokers Industria has a specialized Team of professionals at your disposal. Fill out the form below to get more information and request a free quote.