Trade Credit Insurance and consumer credit A different business model Robert Nijhout – Executive Director ICISA

ICISA members

Credit Insurance is not a Financial Guarantee! Conditional Direct link with delivery of goods or services

Reasons for non-payment The buyer is insolvent, i.e. declared bankrupt or allowed to defer payments following a court or similar decision The buyer has absconded, which amounts to a type of fraud The buyer is able to pay but cannot pay due to currency restrictions or a steep devaluation The goods never arrived and the buyer considers himself absolved from payment

Role of Trade Credit Insurer Policyholder Credit Insurer Reinsurer 2 Buyer 1 Buyer 2 Buyer n Reinsurer 1 Reinsurer n Other Goods / Services Payments Premiums Claim Payments Default Trade credit insurers provide three main services: Risk management through ongoing assessment of present and future creditworthiness of buyers Collection services for unpaid debts Claims payment for delayed or unpaid receivables 5

What is credit insurance? Trade credit insurance insures suppliers against the risk of non-payment of goods or services by their buyers: buyer situated in the same country as the supplier (domestic risk) buyer situated in another country (export risk) What is covered? non-payment as a result of insolvency of the buyer non-payment after an agreed number of months after due-date (protracted default) risk of non-payment following an event outside the control of the buyer or the seller (political risk cover), e.g. risk that money cannot be transferred from one country to another.

Non-payment when solvent The buyer is solvent, but does not (want to) pay Payment is not received for (other) unknown reasons Protracted Default: 6-month waiting period Considered equal to insolvency under the policy

Technology Trends | Digitalisation “New” on-line retail platforms (e.g. Amazon and Alibaba) already account for 12% of the global trade. Digitalisation is approaching an advanced level which enables significant changes of existing business models Successful translation of B2C concepts to B2B global market places. Standardised trade finance flows allow seamless connectivity between involved parties

Technology Trends | Digitalisation Fintech, Insurtech and Blockchain developments outpace regulation and legal framework connectivity with customers, brokers and 3rd parties meeting future customer expectations by using digital technology to interact with them working together with digital goliaths

The Trade Credit Insurance & Surety Academy Training Seminars Basic and Advanced Training Seminars Trade Credit Insurance Surety Bond Insurance Participants 15 max. Tailor-made in-house info@stecis.org www.stecis.org

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