Whether credit insurance is being used to increase sales and market share, to facilitate or enhance financing, or to mitigate risk, IRC can help you identify the policy structure that best fits your business needs. There are primarily two coverage structures available to companies and financial institutions, which are Single-Buyer Credit Insurance and Multi-Buyer Credit Insurance. However, coverage is not necessarily limited to these standard formats. Specialized coverage structures can sometimes be crafted to suit a specific transaction or business structure. IRC can also bring a consortium of insurance companies together to write one policy for larger companies seeking coverage on particularly large, risky, or exceptional exposures.

Multi-Buyer Credit Insurance

The policy is written to cover a portfolio of exposures. Multi-Buyer Credit Insurance can be further divided into three sub-categories:

• Domestic Credit Insurance: Covers sales to buyers located in the same country as the insured entity. For U.S. companies using domestic credit insurance, insurers will often allow Canadian customers to be included, as some companies perceive the risk to be the same as selling to U.S. companies.
• Foreign Credit Insurance: Covers sales to buyers located in countries other than that of the insured company
• Domestic and Foreign Insurance Combined: Covers credit sales to both domestic and cross-bordercustomers.

Multi-buyer insurance underwriters typically require companies to insure all of their open account receivables under the policy. The insurance companies usually do not allow companies to pick and choose the customers (or, with foreign credit insurance, the countries) that will or will not be included in the policy. The philosophy behind the whole-turnover, non-adversely selected spread of risk is that the insurance company will cover both the higher risk and less risky customers in order to provide a blended premium rate structure that applies to all customers, regardless of the level of commercial or political risk associated with a particular customer or country. Exceptions to the whole-turnover requirement for multi-buyer insurance can be presented to the underwriters for their consideration. An insurer may still be willing to write coverage if the remaining portfolio presents a reasonable spread of risk.

Multi-Buyer Credit Insurance traditionally covers only short-term payment obligations (up to one-year open account for capital goods and up to 180 days open account for non-capital goods). However, there are now some insurance companies that can support up to two or three-year repayment terms given to end-users for capital equipment under their multi-buyer policies. Some insurers have also been willing to support up to two-year terms to support dealer floor plan programs.

A company using multi-buyer credit insurance must qualify each of their customers for coverage. In most cases, a company will have a Discretionary Credit Limit, which would allow the insured to extend an insured line of credit to a customer at their own discretion. The other way to qualify the customer for an insured line of credit is to submit an application for a buyer credit limit to the insurance company. For additional details on qualifying customers for coverage, please review the credit insurance underwriting philosophies.