Trade credit insurance for exporters: how it works

Why exporters give credit at all

Advance payment is the safest option for the seller, but in many markets buyers expect 30, 60 or 90 days from delivery or from the transport document date. Sellers who refuse lose business to competitors. Open account terms, however, mean the goods are with the buyer while the money is not yet with the seller. We compare the main security options in the guide to payment terms in international trade.

How a policy works, step by step

1. Application and policy. The exporter declares turnover and a list of buyers. The insurer assesses risk and sets policy terms.
2. Credit limits. For each buyer the insurer grants a limit: the maximum outstanding amount covered at any time. A limit can be reduced or withdrawn if the buyer's situation deteriorates; this normally affects future shipments.
3. Selling within the limit. Amounts above the limit, or sales to a buyer without a limit, are generally not covered.
4. Reporting overdue payments. The policy sets a deadline, counted from the due date, for reporting non-payment. Late reporting can cost you the cover.
5. Collection and indemnity. After reporting, collection usually begins. If the buyer still does not pay, the indemnity is paid after the waiting period stated in the policy.

What the insurance covers

Credit insurance does not cover disputes about quality or quantity. If the buyer contests the delivery, the insurer usually waits until the dispute is resolved. This is why clear specifications, pre-shipment inspection and a well-drafted sales contract matter.

Key policy parameters

Before signing, check the general terms and the policy schedule for:

• retention: the percentage of each loss you carry yourself,
• maximum credit period: the longest payment term you can give a buyer and stay covered,
• waiting period: how long after reporting a default the indemnity is paid,
• reporting deadlines: overdue payments, extensions of due dates, changes in terms,
• premium basis: turnover, limits or outstanding receivables, and whether there is an annual minimum premium,
• exclusions: for example sales to related companies or sales that breach sanctions rules.

Premium rates depend on sector, destination countries, loss history and the quality of your buyer portfolio. The only reliable way to learn them is a quote from an insurer or broker.

Private insurers and export credit agencies

The market includes international private credit insurers and export credit agencies, which are usually state-linked.

In Poland the ECA is KUKE S.A. (Korporacja Ubezpieczeń Kredytów Eksportowych). Under the Act of 7 July 1994 on export insurance guaranteed by the State Treasury, KUKE runs Poland's system of state-guaranteed export insurance. According to its website, KUKE's offer includes receivables insurance, insurance guarantees, factoring, investment insurance against political risk and export financing.

An important distinction comes from EU state aid law. The Commission's Communication on short-term export-credit insurance treats short-term risks in EU countries and a small number of other countries as marketable risks. Member States should leave cover of those risks to private insurers (or public entities acting as market economy operators). State-backed cover matters more for non-marketable risks: longer credit periods and countries outside that list, including many Asian markets. Check the current country list and conditions in the Commission's Communication and with the ECA directly, as they can change.

Supplier credit and buyer credit

For larger contracts (machinery, production lines, projects) you will meet two financing models:

• supplier credit: the exporter lets the buyer pay in instalments and insures the receivables, which can then be sold to a bank,
• buyer credit: the exporter's bank lends directly to the importer to pay the exporter, who is paid sooner; the insurance protects the bank.

Both require assessment of the country and the buyer and full contract documentation. Discuss availability and terms directly with the ECA and your bank.

Insurance or factoring

Insurance protects against loss but does not bring cash forward. Factoring provides funding and, in its non-recourse form, also takes over credit risk. The two are often combined: a factor finances receivables that are covered under the exporter's credit policy. See the comparison in our guide to export factoring.

Before your first shipment on credit

• Check the buyer in company registers and sanctions lists (supplier and buyer verification).
• Apply for a credit limit before shipping, not after.
• Align the contractual payment term with the policy's maximum credit period.
• Assign someone to monitor overdue reporting deadlines.
• Keep proof of delivery and of acceptance of the goods.

On Hiram, every company is screened against EU, UN, UK and US sanctions lists and each profile shows its registry verification level, but Hiram does not guarantee payment and does not offer insurance. Credit risk assessment and the policy remain the exporter's responsibility. You can look for buyers for your products on the Hiram market.

This article is informational and does not replace advice from a broker or insurer.

Sources

• KUKE S.A., website and exporter offer: https://www.kuke.com.pl/ (opens in a new tab)
• Polish Ministry of Finance, Export insurance: https://www.gov.pl/web/finanse/ubezpieczenia-kredytow-eksportowych (opens in a new tab)
• KUKE, Amendment of the act on State Treasury guaranteed export insurance: https://kuke.com.pl/wiedza/nowelizacja-ustawy-o-gwarantowanych-przez-skarb-panstwa-ubezpieczeniach-eksportowych (opens in a new tab)
• European Commission, Short-term export-credit insurance Communication (2021 consultation): https://competition-policy.ec.europa.eu/public-consultations/2021-short-term-export-credit-insurance_en (opens in a new tab)