Euler Hermes

FAQ

What is trade credit insurance?

​Trade credit insurance, also called accounts receivable insurance, provides your business with protection against the failure of your customer to pay its trade debts. This can arise because your customer becomes insolvent or because your customer does not pay within the set timeframe. These risks are usually described as commercial risks. Companies that export can also protect themselves against a range of political risks that may prevent or delay payment. This arises when payment is not received as a direct result of a war in the buyer's country, cancellation of a contract by the government of the buyer's country, or when a government implements regulations which either prevent the export or import of the goods - or prevent or restrict the transfer of hard currency - from the buyer's country. ​

Who uses trade credit insurance?

Any business selling on open account terms to other businesses can benefit from trade credit insurance. Euler Hermes’ customers range in size from small businesses to large, multi-national companies. Firms in most sectors of the economy - including business services as well as those trading in goods - use trade credit insurance. 

What credit terms can be protected?

​Business credit insurance is for short-term trade accounts receivable, those due in less than one year. ​

​Why should I consider trade credit insurance?

On average, 40% of a company's assets are in the form of trade debts. Sometimes the figure is far higher. It is very difficult for a company to predict which client will default on payment. Close to 50 percent of all payment defaults arise from vendors with whom stable and long-term trade relationships have been established. 

The cost to a business of non-payment can be considerable. For example, if a company's profit margin is 5 percent and one of its customer defaults on a debt of €100,000, the company will have to achieve additional sales of €2,000,000 to make up for the lost profits. More importantly, the lost cash flow could be devastating. Non-payment weakens your company and lowers its investment capacity. A trade credit insurance policy helps in the management of your accounts receivables and compensates you in the event of non-payment.


​What are the benefits of trade credit insurance?


There are many benefits including:

 

  • Better credit control and protection against catastrophic bad-debt losses 
  • Better risk management through an early warning system bolstered by the Euler 
  • Hermes database
  • Better business planning through the elimination of unknown risks 
  • Improved working capital from your lender because you have enhanced the 
  • quality of your accounts receivable with trade credit insurance
  • Better sales targeting, thanks to Euler Hermes’ proprietary information that can 
  • be used to target new customers and markets and monitor existing customers
  • The benefit of Euler Hermes’ debt collection capabilities and network 
  • Improved cash flow, because you receive payment for unpaid invoices that are insured. 

 


More on trade credit insurance with Euler Hermes​


​Can I just cover the accounts that I am worried about?

No insurance program can work over the long-term if only questionable buyers are covered. But more specifically, no one can accurately predict when a company may fail. Euler Hermes underwrites on a whole turnover basis. This provides the biggest value to its clients and supports a long-term relationship. 


​What is the level of indemnity?

The level of indemnity typically ranges from 60%-90%; however, the level varies depending on the policy you select, your credit management experience, your accounts receivable portfolio, and your premium target. 


If I incur a loss, how soon will a claim be paid?

Generally, the claim will be paid within 150 days. 


​Are any services available on-line? ​Are any services available on-line?

Yes. With EOLIS​, Euler Hermes’ on-line policy management system, you can make credit requests, file a claim, and monitor your claims any time you want via the internet. 


​How much does trade credit insurance cost?

For the most popular policy, the premium is calculated on a percentage of your sales. This rate is generally well below 1%, depending on the trading history and historical debt loss of your company, your trade sector and your customer base. When political risk coverage is included, the premium may be higher. Given that the average level of bad debt experienced by companies is approximately 0.7% of sales, the majority of businesses will find trade credit insurance to be highly cost-effective, even before taking into account the many additional benefits that credit insurance brings to your business. ​

What happens if you can't collect?

​If we exhaust our pre-legal efforts and you wish to end collection activity there, we can close the case. However, we can also advise you on the effectiveness of legal action in the circumstances of your case and the next steps to try to recover your money. ​