Protect your accounts receivable and foreign investments, and ensure the safety of key people at your organization.
Insurance for trade credit and political risk perils can help protect your company against difficulties with a trading partner — including the insolvency (bankruptcy/receivership), protracted default (slow pay), non-acceptance (refusal to take goods) and political risk events. Political risk insurance hedges the risk of longer-term foreign investments while kidnap & ransom insurance protects your people abroad. Learn how our specialists can help.
Trade Credit and Political Risk Insurance – Protect Accounts Receivable(Foreign & Domestic)
Protect your business against nonpayment of accounts receivable, which for many companies is their largest asset. In today’s competitive environment, it is necessary to offer credit terms to customers. The uncertainty of customer credit risk can hinder your ability to grow and finance your business.
Trade with Certainty
With trade credit insurance, the uncertainty of customer payment is transferred to an underwriter so you can focus on managing and growing your business. Partnering with a trade credit insurer will lead to a higher quality customer portfolio and lower overall credit losses. Most underwriters have on-the-ground credit risk underwriting in every major country in the world. This includes the information, systems, people and sophisticated risk management tools of the underwriter to manage and mitigate risk.
The benefits of credit insurance go well beyond the obvious protection against bad debt losses, and our Trade Credit practice can assist you in securing the coverage you need. Many of the benefits can be quantified, offsetting the incremental premium spend.
Hedge Against Unforeseen Bad Debts
Most companies do not have sufficient reserves to deal with the default of one of their largest customers, and self-insurance is an inefficient means to prepare for potential losses. Trade credit coverage is offered by a well-capitalized insurer able to spread risk over a large portfolio.
- Reduce bad debt allowance and bring this reduction back into income, allocating this reserve more productively.
- Cap bad debts, avoiding any material one-time loss from a large customer default or deterioration of a specific foreign market or industry segment.
- More accurately forecast bad debt costs, removing variability.
Trade credit insurance can help you increase margining on receivables and, in some cases, reduce interest rates. Lenders continue to take a conservative approach to providing funding. Credit insurance enhances the quality of the bank’s primary security and gives them the comfort to increase advance rates to as much as 90% of qualifying receivables. It also mitigates the lender’s concern with customer concentration risk. This is especially beneficial for export receivables where lenders often provide little or no margining of foreign receivables.
Expand sales in the most difficult markets with the confidence of getting paid, even in cases where insight into a client’s financial strength is lacking. Trade credit insurance allows you to move into new industries or countries and offer open terms to foreign clients, which can be a competitive advantage or necessity that contributes to increased revenues. Letters of credit are an inefficient and expensive means of trading that tie up the operating line of the foreign client.
Secure Peace of Mind, Wherever You Trade
NFP has an expert team of trade credit and political risk insurance service providers who are ready to actively assist with the day-to-day operation of your program:
- Improving coverage: Where customer coverage is restricted due to perceived risk, NFP pursues alternative forms of one-off coverage. Where information is limited, NFP directly pursues confidential information on buyers around the world so underwriters can consider the larger limit requirements. NFP is an extension of each client’s credit department to ensure every possibility is considered to establish coverage.
- Claims management: A specialist credit insurance broker with underwriting experience, NFP advises clients in qualifying claims. NFP pre-vets claims to ensure they are presented to the underwriter for best results, responding to all of the underwriter’s inspection criteria.
- Marketing your program: NFP interacts with all of the specialist underwriters on a daily or weekly basis and has strong senior management relationships with all markets. NFP ensures you are informed of the alternatives so you are well positioned to negotiate your renewal.
A Simple Process to Consider Credit Insurance
Considering credit protection requires very little effort from our clients. The process involves the completion of a two page application, a copy of an electronic aged trial balance and a short discussion to clarify further where credit protection may support key corporate strategies. The output is a management report:
- Identifying and quantifying the major credit and political risks of the largest customers
- Outlining the alternative approaches available to mitigate these risks
- Quantifying the other strategic benefits of alternate credit protection solutions
Reach out to us today to explore the ways our credit insurance programs can help your company grow.
Political Risk Insurance – Protect Foreign Assets & Investments
Political risk insurance protects your investments, business assets, income streams and properties against loss in the event of certain government actions or political violence. The coverage protects assets against government and political action, as well as reimbursing you for costs incurred prior to contract termination. This allows your company to take advantage of overseas markets that might otherwise present too much of a risk.
Leverage Opportunity with Political Risk Insurance
Political risk insurance empowers your business by covering:
- Expropriation: Government interference where foreign governments seize, confiscate or otherwise take a company’s investment. This can include adopting a series of measures that have the effect of expropriation — creeping expropriation.
- Transfer and conversion: During an economic crisis, foreign governments or central banks may decide to impose restrictions or prohibitions on the conversion of the local currency to hard currency or may prevent hard currency from leaving the country.
- Political violence: Political terrorism, war, civil strife or other forms of political violence can damage or destroy a company’s assets and prevent it from conducting operations essential to doing business.
- Breach of contract/contract frustration: A host government breach or repudiation of investor agreement can cause losses.
Although doing business always carries risks, NFP can structure an insurance program tailored to your concerns, needs and markets to keep your company in a strong position, even in adverse circumstances.
Kidnap & Ransom Insurance – Protect Your People
For companies managing major trade relationships and transacting business all over the world, the safety of key people and top professionals is an ongoing priority. Access to certain markets comes with the heightened risk of bad actors attempting to extort your company’s assets by threatening the professionals involved in trading.
While theft and other direct crime can be covered by your standard liability policies as well as political risk and trade credit coverages, kidnap, ransom and extortion insurance can help keep you and your organization better covered when under extreme circumstances.
Stay Insulated with Kidnap and Ransom Insurance
NFP’s experts can help you better prepare for the impacts of kidnap, ransom and extortion threats, abduction and kidnapping, stalking and the other perils that follow access to capital. Our experts are ready to help, from consultation to helping you insure against personal financial loss, and plan for negotiation support, medical treatment and other necessary assistance in the event of an emergency.