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Credit insurance in 7 questions

You have good relationships with your suppliers. Despite tense negotiations on prices, they were always flexible on payment terms and allowed you to give your cash flow breathing room when it needed it. Until one day your partner calls you and demands cash on delivery, which has never happened before. When you ask him why, he explains that you are no longer covered by credit insurance. You had never heard of it until then.

What is credit insurance?

Credit insurers are establishments which offer their policyholders the possibility of protecting themselves against the risk of non-payment by their own customers. This service is only aimed at companies operating in B2B.

The three market leaders are Euler-Hermes (formerly SFAC), Coface (formerly a French state holding) and Atradius. These are the three actors with whom you may interact.

They are remunerated by insurance premiums which are calculated according to their client's insurable turnover. Their main performance indicator is the claims-to-premium ratio, with claims being compensation paid on unpaid commercial debts.

How it works ?

Credit insurers are establishments which offer their policyholders the possibility of protecting themselves against the risk of non-payment by their own customers. This service is only aimed at companies operating in B2B.

The three market leaders are Euler-Hermes (formerly SFAC), Coface (formerly a French state holding) and Atradius. These are the three actors with whom you may interact.

They are remunerated by insurance premiums which are calculated according to their client's insurable turnover. Their main performance indicator is the claims-to-premium ratio, with claims being compensation paid on unpaid commercial debts.

Why should I care when I'm not a customer?

Your suppliers, if insured, most likely have a credit limit on your business. They will tend to be flexible on payment terms when coverage is complete, and more restrictive and rigid on deadlines and the level of outstanding debt in the event of limited coverage. A refusal or insufficient coverage could even – in extreme cases – lead them to stop working with you. Everything will depend on the relationship of trust that you have been able to establish and the guarantees of financial solidity that you can give them.

Can I find out what credit insurers think about my business?

While you have no contractual link with them, credit insurers have a capital importance in the management of your WCR, and therefore on the flexibility of your cash flow. Except in exceptional cases, you will not be able to know the details of their exposure to your company (in other words a list of suppliers with the outstanding amount granted to each of them) but you can consult your quote on their website. It will give you an idea of the overall outstanding amount that they are prepared to insure.

At first glance, credit insurers have the position of great judges who are invisible to you but whose decisions weigh heavily on your supplier credit. Let us now study the decision-making process.

Who at the credit insurer decides on my supplier credit?

Each credit insurer has its own operation but all have a risk department whose analysts (or arbitrators) make decisions on credit files. Their role is therefore to arbitrate between the commercial risk (not satisfying the insured) and the risk of non-payment. by controlling the establishment's commitments to a buyer.

You may be contacted by an analyst when the institution's exposure to your file exceeds a certain threshold. You will generally be asked for your financial statements and your quantified outlook. The more risky your situation is considered by the analyst, the more meticulous he will be in his search for information.

What should I do when a credit insurer contacts me for information about my business?

We know that it is not easy to open up and give information about your business to a person who was previously unknown to us. We would be tempted not to cooperate or to be vague in our speech, but you should know that analysts tend to be harsh in the event of a lack of information or if the elements obtained are not clear enough. It is better to be open and frank in discussions with the credit analyst, without revealing all his little secrets.

Is a restrictive decision final?

This profession is somewhat paradoxical: claims are necessary to justify the usefulness of the product; an insurer who never compensates its policyholders only fulfills its role half-heartedly.

The account managers of these establishments know this only too well and will not procrastinate before putting pressure on an analyst to grant coverage to a strategic policyholder. A loss will be experienced as a lesser evil for this type of key insured as long as they remain satisfied with the services and renew their contract.

If you are refused, you should not wait before sending information to your supplier to try to tip the balance in your favor. Whether this supplier is a key insured or not, customer satisfaction is an aspiration for any establishment.

Let's finish in a few words

Credit insurance proves to be a brake or accelerator for the development of business flows between two commercial partners. We'll look in more detail in future articles on how you, as a buyer, can lead them to make positive decisions for your business.

Illustrative photo.

 

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