10 Best Practice Tips for Trade Credit Insurance Compliance

By Kirk Cheesman

1. Ensure the legal entity placing the orders with your company is the same legal entity your company is invoicing. Your endorsement must always match the legal entity you are invoicing.

2. Be aware an insurer will only pay valid claims up to the level of the permitted limit or debt (whichever is the lesser). If your company has exceeded (or is likely to exceed) your credit limit, please apply to the insurer for an increase.

3. If your company’s trading terms with a debtor are not within the maximum terms of payment allowed on the policy, it is critical the insurer endorses (agrees) to special terms for that debtor to protect your position in the event of a claim.

4. Ensure invoices are raised (and cover is held) on the entity legally responsible for payment. This is generally the entity that has placed the order/s with your company - i.e. the contracting party - but not always.

5. Be aware of the following time frames for claim lodgements:

Atradius: within 6 months of "Date of Loss"
QBE: within 6 months of Insolvency / Protracted Default
Coface: within 30 days of expiry of Maximum Credit Period
Euler Hermes: within 6 months of Insolvency / Protracted Default 

(Note: lodgement times may vary by country)

6. If your company is insured with Coface or Atradius, the policy calculates maximum trading terms from invoice date. Ensure the terms of payment with your customers (particularly if payment terms are from end of month of delivery) fall within the scope of the policy.

7. When invoices are raised by associated companies, ensure these associated companies are added to the policy as joint insureds. It is crucial invoices are raised from entities insured under the policy in the event of a claim.

8. Remember that insurers pay claims based on the endorsed limit (or debt whichever the lesser). While any trading beyond an approved limit is at your own risk, this type of trading may also have salvage implications in the event of a claim.

9. Invoices raised when an undisputed debt remains outstanding beyond the maximum extension/credit period will not be covered. Such overdue debts need to be reported in accordance with your policy.

10. Contact your ICBA client service manager with any queries or concerns.

(Kirk Cheesman is Managing Director of ICBA Australia and New Zealand, National Credit Insurance (Brokers) Pty Ltd.)