Credit Insurance
protects your company against the risk of non-payment due to insolvencies or protracted defaults of your customers.
Credit insurance, also known as trade credit insurance, is a financial product designed to protect companies from the risk of non-payment by their customers. This type of insurance covers receivables and ensures that companies can maintain a stable cash flow even if a buyer does not pay for the goods or services supplied. Credit insurance is crucial for companies as it mitigates financial risks, supports growth and increases financial stability.
The insurance cover applies regardless of whether the non-payment is due to insolvency, a protracted default, or, optionally, political risks in the case of international trade. By insuring their receivables, companies can protect themselves from significant financial losses and ensure that their cash flow remains uninterrupted.
Various credit insurance solutions
Whole turnoever
Protects your entire portfolio of trade receivables from non-payment and ensures that your business remains financially stable, even if multiple buyers default.
Top-up
Provides additional protection if the primary insurance limits are not sufficient and ensures comprehensive risk management.
Selected Buyers
Provides targeted coverage for your some of your customers, safeguarding your revenue streams from key buyers.
Excess of Loss
The insurer covers losses that exceed a set amount, called the retention limit. This protects you from catastrophic losses and ensures financial stability by limiting the risk exposure to a manageable level.
Single Risk
Indispensable for companies heavily dependent on a single customer. This insurance covers the risk of non-payment by this important buyer.
Multi-layer programs
Companies sometimes need a mix of these five solutions, instead of relying on a single one.
Key sectors needing credit insurance
Although credit insurance applies to all B2B transactions in which a company offers goods or services, in Switzerland it is most commonly used in the following sectors.
Commodity trading
Risk mitigation: Protects against payment default risks due to market volatility and geopolitical events.
Cash flow stability: Ensures a steady cash flow by covering defaulted payments.
Improved credit terms: Enables favourable credit terms to be granted to buyers, increasing competitiveness and market reach.
Manufacturing
Market expansion: Facilitates entry into new markets by securing receivables from previously unknown buyers.
Financial stability: Protects against insolvency and payment defaults and ensures uninterrupted cash flow.
Credit management: Supports the provision of competitive credit terms, improves customer relationships and increases sales growth.
Financial institutions
Capital relief: Reduces risk-weighted assets (RWA) under Basel III, freeing up capital for investment.
Risk management: Reduces the risk of bad debt losses, ensuring financial health.
Regulatory compliance: Helps fulfil regulatory capital requirements and ensures stability and compliance.
Why credit insurance is important for companies?
Risk Mitigation
Credit insurance protects companies from the financial impact of payment defaults and insolvencies. This protection is essential in a volatile economic environment where the risk of non-payment is increased. By mitigating these risks, companies can operate with greater confidence and stability.
Stronger customer relationships
Offering credit terms to customers can be a competitive advantage. With credit insurance, companies can offer their customers more attractive credit terms without increasing their own financial risk. This can strengthen customer relationships and increase sales.
Improved financing options
Credit insurance makes receivables more secure and facilitates financing methods such as factoring, securitisation and forfaiting. With insured receivables, companies have access to better credit terms and can expand their business activities. This improved financing supports company growth and expansion into new markets.
Improved cash flow
By ensuring that invoices are paid even if a customer defaults, credit insurance stabilises cash flow. This stability allows companies to manage their finances more effectively, meet their own payment obligations and invest in strategic initiatives without the constant worry of cash shortages.
Capital relief
Under regulations such as Basel III, financial institutions must hold certain capital reserves. Credit insurance helps to reduce risk-weighted assets (RWA), which reduces the amount of capital that must be held in reserve. This capital relief frees up funds that companies can reinvest in growth opportunities, increasing their financial flexibility and profitability.
Case study: Credit insurance in commodities trading
A Swiss commodity trading company specialising in agricultural products found itself exposed to considerable risk due to volatile market conditions and geopolitical uncertainties. By taking out a whole turnover credit insurance, the company was able to protect itself against payment defaults by international buyers.
This protection and the associated factoring programme enabled the company to grant favourable credit terms and thus improve its competitive advantage. In this way, the company was able to expand its market presence, improve the stability of its cash flow and mitigate financial losses caused by buyer defaults, thereby ensuring sustainable growth despite market fluctuations.
Case study: Credit insurance in manufacturing
A leading Swiss manufacturer of precision machinery wanted to expand into emerging markets but was concerned about the credit risk of new buyers. By taking out credit insurance, the manufacturer protected its receivables against non-payment and was able to confidently offer extended credit terms.
This strategic move not only facilitated market entry, but also improved the company’s cash flow and financial stability. As a result, the manufacturer was able to increase its international sales by 25% while minimising the impact of potential buyer insolvencies.
Case study: Credit insurance in financial institutions
A multinational bank wanted to optimise its capital requirements for its B2B car leasing business. Although the leased vehicles served as collateral, the bank utilised an excess of loss (XoL) credit insurance solution to reduce the capital reserves required under Basel III regulations.
By transferring a significant portion of the credit risk to a top-rated insurer, the bank was able to reduce its capital requirements by 90%. This capital relief enabled the bank to reinvest in growth initiatives, increase profitability and ensure regulatory compliance.
DiotSiaci Crédit Partnership
DiotSiaci Crédit is the No. 1 credit insurance broker in France with the largest team in the world in a single country, coming from the fields of credit insurance, credit management, surety bonds and finance.
Raxell has signed an exclusive partnership agreement with DiotSiaci Crédit which allows us to combine our local and sector expertise with DiotSiaci’s resources and international network to provide the best service to our clients.
https://www.diot-siaci-credit.com/
Why should you choose Raxell?
Raxell offers a personalised service and extensive industry expertise to provide you with the most effective credit insurance solutions. Our comprehensive approach includes assessing your risk profile, negotiating with first class insurers and ensuring regulatory compliance. We continuously monitor and optimise your policies to adapt to market changes ensuring your business remains resilient and competitive.
