Are you thinking about obtaining credit insurance to cover your international exports?
Credit insurance is an important resource for helping exporters, and especially SME exporters, mitigate the risks of non-payment from overseas clients.
But it doesn’t offer protection in all circumstances, and it can be difficult and expensive to obtain.
We’ve produced this guide to help you to evaluate the pros and cons of credit insurance vs. international debt collection.
Table of Contents
What is Credit Insurance?
Credit insurance is aimed specifically at customers who cannot get private insurance, offering favourable terms on a wide spectrum of exports. It provides cover for non-payment of goods and services.
Given the additional challenges involved in chasing monies owed from export clients, export credit insurance is seen as a simple, reliable alternative.
However, this type of insurance can be expensive and difficult to get.
Political instability, fractured supply chains, and the looming threat of a tariff-fuelled global trade war are all ramping up the risk of overseas trade. Insurance providers are all too aware (and wary) of risk. That makes export credit insurance on the private market expensive and smothered with conditions:
- You’re unlikely to find policies covering small value exports
- You’re also unlikely to get cover for exports to a single buyer
- Most insurers will simply refuse to offer cover for high-risk and emerging markets
Many export businesses find themselves locked out of payment protection as a result.
What Does UKEF Credit Insurance Cover?
If you are an SME exporter looking to protect your income, the place to look for credit insurance is UK Export Finance (UKEF). As the UK’s government-backed export credit agency, UKEF offers a broad range of financial products designed to suit the needs of all exporters.
UKEF policies cover:
- Up to 95% of total loss value and payout on instances of non-payment after goods are delivered or services provided
- Buyer insolvencies
- Contract terminations
- Unforeseen political events that lead to demonstrable losses for the exporter
Unlike most private export credit insurance policies, UKEF’s cover does not have a minimum value, so exports of any size are eligible.
How Much Does UKEF Credit Insurance Cost?
You can check eligibility for exports to private sector buyers using the UKEF’s online Get a Quote portal.
What Are the Eligibility Criteria?
Export businesses must be based in the UK. At least 20% of the export’s value should derive from UK goods and services.
What Is Not Covered with UKEF Credit Insurance?
The UKEF will cover exports to more countries than the majority of private insurers are prepared to cover, although the list is by no means exhaustive.
Geographical eligibility is not based on the destination of goods and services, but the country the buyer is based in. A full list of coverage by country can be found here.
The most significant exception is that, due to the terms of international trade agreements, the UKEF cannot offer cover on exports to some of the UK’s closest trade partners. These countries are deemed to have “marketable risks”, meaning that exporters should be able to readily find credit insurance privately:
- EU
- USA
- Australia
- Canada
- Japan
- Norway
- Iceland
- Switzerland
It’s also worth noting that UKEF policies can be refused if you cannot provide evidence that you’ve been unable to secure private cover.
Finally, UKEF credit insurance does not cover:
- Losses resulting from unresolved disputes between the exporter and the buyer
- Goods in transit
- Fossil fuel products
Separate cargo or shipping insurance is required if you want to protect yourself from losses arising from goods being damaged, lost, or stolen in transit.
No Cost. No Obligation.
100% Confidential.
International Debt Collection vs Credit Insurance
When you can’t get insurance, remember that you can still recover your losses from unpaid export invoices by using an experienced debt collection agency.
With an experienced, professional international debt collection specialist like Safe Collections in your corner, you’d be surprised how often you will get what you’re owed, and you won’t have to pay for the privilege.
To find out more, contact our team today.
