Trade Credit Insurance Overview

The Canadian Trade Credit Insurance Market

Trade credit insurance, also known as accounts receivable insurance, is an essential tool for businesses of all sizes, from small enterprises to large corporations. This type of insurance protects companies against the risk of non-payment by their customers, ensuring that their cash flow remains stable and their financial health is safeguarded. In Canada, the trade credit insurance market is relatively small and concentrated, with a few key players dominating the industry. Among these, Export Development Canada (EDC) and Coface stand out as market leaders, offering comprehensive and competitive trade credit insurance products.

Export Development Canada (EDC) is a prominent player in the trade credit insurance market, providing businesses with the protection they need to grow and thrive in the global marketplace. EDC’s trade credit insurance solutions are designed to protect foreign accounts receivable against losses when customers fail to pay. This coverage not only safeguards a company’s cash flow but also increases access to working capital, allowing businesses to offer more competitive payment terms to their clients
By mitigating the risks associated with international trade, EDC helps Canadian companies expand their operations and achieve their growth ambitions.

Coface is another leading provider of trade credit insurance, offering tailored solutions to meet the unique needs of businesses across various sectors. Coface’s trade credit insurance products are designed to help companies grow safely by minimizing the risk of non-payment and providing the security needed to strengthen their financials

Whether a business is looking to enter a new market, expand relations with key customers, or simply increase sales, trade credit insurance can help achieve these goals while protecting against financial losses. Coface’s global expertise and extensive network of risk experts ensure that businesses receive the support they need to navigate unpredictable economic conditions and operate smarter and safer

For small businesses, trade credit insurance can be a game-changer. It provides the confidence to extend credit to new customers and explore new markets without the fear of non-payment. This can lead to increased sales and growth opportunities that might otherwise be too risky to pursue. Additionally, having trade credit insurance can improve a company’s creditworthiness, making it easier to secure financing from banks and other lenders. This is particularly important for small businesses that may have limited access to capital and need to maximize their financial resources.

Medium-sized and large enterprises also benefit significantly from trade credit insurance. For these organizations, the stakes are higher, and the impact of non-payment can be more severe. Trade credit insurance provides a safety net that allows these companies to manage their credit risk more effectively and maintain a healthy cash flow. It also enables them to offer more attractive payment terms to their customers, which can be a competitive advantage in the marketplace. Furthermore, trade credit insurance can support strategic growth initiatives, such as entering new markets or expanding product lines, by providing the financial stability needed to take on new challenges.

Trade Credit Insurance Application

The trade credit insurance underwriting process is designed to be efficient and straightforward, ensuring that businesses can quickly secure the coverage they need to protect their accounts receivable. the trade credit insurance underwriting and application process is designed to be quick and easy, allowing businesses to secure the protection they need with minimal hassle. By providing detailed information upfront and working closely with the insurer, businesses can ensure they receive the best possible coverage to safeguard their accounts receivable and maintain financial stability.

Trade Credit Insurance History & Benefits

Although trade credit receivables are one of the largest assets on the balance sheet, this material credit risk has not historically been insured through insurance by North American companies.  This is changing quickly with credit insurance growing between 15% and 20% per year. Companies are using trade insurance for many reasons including:

• Helps more accurately forecast bad debt costs eliminating any material one-time loss from a large customer default, deterioration of an industry segment, or a political risk event.
• Can expand sales to customers where credit limits may be restricted.
• Can improve financing arrangements with increased accounts receivable margining and lower interest rates.
• Can improve cash flow and reduce the bad debt allowance or eliminate the negative impact on earnings of adding to this reserve.
• Leverage the information, systems, people and sophisticated risk management tools of a major credit insurer that has a presence in every major market around the world.
• Access to a Credit Insurance Management Report which helps insured’s by:
  • Identifying and quantifying the major credit and political risks of your major customers
  • Outlining the alternative approaches available to mitigate these risks and
  • Quantifying the other strategic benefits of alternate credit protection solutions.

Trade credit insurance is a vital tool for businesses of all sizes, offering protection against the risk of non-payment and supporting growth and financial stability. With leading providers like Export Development Canada (EDC) and Coface, Canadian companies have access to comprehensive and competitive trade credit insurance solutions that can help them navigate the complexities of international trade and achieve their business objectives. Whether you are a small business looking to expand your customer base or a large corporation seeking to mitigate credit risk, trade credit insurance can provide the security and confidence needed to succeed in today’s dynamic business environment.  Click Here To Get A Trade Credit Quote or to learn more about Trade Credit Insurance coverage and how it can help protect your organization’s balance sheet connect with an ALIGNED Insurance broker today.