Navigating Trade Credit Insurance Policies

Unprecedented times require exceptional support and specialised industry knowledge.

Trade credit insurance policies can provide financial relief to businesses whose buyers are unable to pay their debts as and when they fall due.

During these difficult times, a number of businesses may have recourse to trade credit insurance policies.

Navigating the terms of the policy and understanding your obligations as an insured can be key to getting the greatest benefit.

Review your cover

Conduct a thorough review of your trade credit insurance policy – remember, as circumstances change, policy exclusions may arise.

Cover may not be available under your policy if:

  • You have reason to believe that your buyer is unable, or likely to be unable, to perform its obligations or comply with the contract.
  • Your buyer is insolvent or imminently insolvent.
  • There has been a breach of the Maximum Extension Period (MEP) under your policy.

Can you claim?

Whether or not your policy responds to a claim will be dependent on the facts of each case and the terms of the policy.

However, if in doubt, it is advisable to contact your trade credit insurer at the earliest opportunity. This is because many policies contain a notification clause, requiring the insured to notify the insurer of any adverse information about the insured's buyer or that may affect the credit limit in place under the policy.

A failure to provide timely disclosure may limit your ability to claim under your policy.

Take care before acting – a well-intended misstep could cause disaster

Experienced business operators are used to making commercial decisions, including when it comes to extending payment terms or negotiating arrangements with suppliers.

Payment terms should not be extended in contradiction to the policy, which will usually provide a fixed time beyond which a due date for payment cannot be extended if cover is to apply. Pay particular attention to any notice from the insurer withdrawing a credit limit or imposing conditions on the provision of credit.  

Similarly, the referral of an outstanding payment to a collections agency may result in an automatic stoppage of cover under the policy.

As natural as it may seem to act quickly to try to minimise loss, have regard to the terms of the policy before acting to ensure you do not void your cover.  A tip is to engage your broker and let them know your plans so you can receive your insurer's consent before acting.


The responsiveness of a policy will depend on the facts of each case and the compliance by the insured of the policy terms.

In some cases, this will mean compliance with directions given by the insurer to take certain steps to minimise loss.

Whether you are considering making a claim under your policy in the near future or not, some of the key factors that may assist to maximise the chance of a policy response are set out below:

  • Are you trading within your approved terms, both within your MEP and the terms of any maximum credit limit amount?

  • Have you complied with all policy requirements for obtaining security, such as obtaining personal guarantees or the registration of financing statements on the Personal Property Securities Register?

  • Has your trade credit insurer withdrawn or varied any credit limit decisions for particular buyers, industries or countries?

  • Have you reached a reporting threshold?

  • Has your insurer asked you to undertake specific action with respect to any buyer (eg issue a letter of demand or pursue recovery action)?

  • Have you engaged with the Insurer before taking steps to extend credit or alter payment terms or conditions?

Originally published by Johnson, Winter & Slattery, April 2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.