There are several types of credit insurance:
The classical credit insurance.Highly developed in Europe, the classical credit insurance offers the following services:
- Prevention: analysis of the creditworthiness of your customers,
- Monitoring: ongoing evaluation of your customer portfolio,
- Collection in case of late payments or unpaid through the use of litigation and court procedures,
- Compensation: payment by the credit insurer of an indemnity to the insured (usually between 85% and 95% of the net amount of your outstanding debt) if unpaid covered by a warranty.
- for each of your customers you request to your insurer a guarantee based on estimated credit limit need. The insurer can then accept or refuse to grant it to you according to the evaluation of your client's solvency.
- The insurer can agree to give you the warranty on a part or on the full outstanding amount requested. In case of unpaid invoices, the insurer reimburses you in proportion to the net amount of your receivable determined when setting up your contract. The payment of such compensation occurs within 30 days in case of insolvency proceedings of your client or within a few months for unpaid from customers which are not in bankruptcy proceedings.
- For small outstanding amounts, you automatically get a minimum amount guaranteed if your client is not on the list of firms excluded by your insurer.
- The insurer is remunerated by a percentage of your turnover (this is the insurance premium). A minimum premium amount is fixed by year (contract clause).
- If at the end of the year the contract is beneficial to the insurer with a loss ratio to its advantage, you can recover a part of that amount through the "beneficial interest".
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The credit insurance contract "excess of loss"This type of insurance is completely different from the classical credit insurance. It is usually offered to companies of substantial size (+ 20 million euros of turnover) and performing a strict management of their receivables. The insurer guarantees that the losses over a given period will not exceed the threshold specified in the contract which is the maximum amount of unpaid debts that the company can support:
- this insurance does not cover the outstanding invoices with each of your customers but your whole accounts receivables,
- your accounts receivables are insured as a building can be insured against fire risk,
- there is a compensation only if the level of bad debts reached a critical threshold defined by contract.
This type of insurance refers to businesses that want protect themselves against the risk of being impacted by an exceptional level of bad debts.
It implies a high degree of autonomy in managing customer risk because the insurer does not offer the services of a traditional credit insurance including analysis of credit worthiness of your customers.
The guaranted financial reportThis solution is offered by companies specialized in credit information and credit insurance. On your request, they will provide you with a detailed financial report about your client with a guarantee defined according to the creditworthiness evaluation of your client.
In case of unpaid invoices with this company the insurance company will reimburse you according to your contract.
|The main credit insurers|
|AIG: largest insurer in the world, AIG offers many differents products (insurance, collection, credit management information) adapted to each type of company.|
|Euler Hermes: recently acquired by AGF Allianz, Euler Hermes is No. 1 in many European countries and USA. The whole group accounts to 37% of the global market of the credit insurance. Euler Hermes offers credit insurance products as well as debt collection, factoring and risk assessment.|
|Coface: private credit insurer but performing missions for of the French government, Coface SCRL has ORT (No. 1 intelligence in France) and Unistrat (credit insurer on political risks). Coface is part of Natexis Banques Populaires. Initially specializing in the export market, it operates since 2000 in the domestic market. It holds 17% of the global credit insurance and also provides intelligence on companies, collection and factoring.|
|Atradius: Created after the acquisition of Gerling NCM by Swiss Re and Deutsche Bank, Atradius is present in many countries with a global market share of 27%. Atradius is present in 42 countries where it offers credit insurance and collection products.|