Category: Trade credit & political risk · Reviewed by Jake Leat, Associate Director · Last reviewed 2026-06-05
Trade credit insurance covers a business against the risk of non-payment by its commercial customers, on either a domestic or export basis; the cover responds principally to buyer insolvency and protracted default (failure to pay within an agreed grace period after the due date), with political risks typically added for export trade.
Category: Trade credit and political risk Also known as: TCI, credit insurance, accounts receivable insurance First codified: continental European credit insurance from late-19th century; UK private market from c.1950s; ECGD (now UK Export Finance) from 1919 Related legislation: Insurance Act 2015 [1]; Consumer Insurance (Disclosure and Representations) Act 2012 (not applicable to commercial credit insurance) [2]; Companies Act 2006 [3]
Trade credit insurance covers a supplier against the risk of non-payment by its commercial buyers. The cover responds to two principal perils: buyer insolvency (legal insolvency events including administration, liquidation, receivership, bankruptcy or equivalent foreign proceedings); and protracted default (failure of the buyer to pay within a specified grace period — typically 90 to 180 days — after the contractual due date). Export trade credit cover typically extends to political risks such as confiscation, expropriation and nationalisation, currency inconvertibility and contract frustration by host government action [4][5].
The cover is structured in two principal forms. A whole turnover policy covers all or most of the insured’s trade receivables, with credit limits set by the insurer for each buyer, providing a comprehensive credit risk management facility. A specific account policy covers a particular buyer or a small number of named buyers, used for high-value exposures or where the insured prefers to cover only specific concentrated risks rather than its whole book [4][5].
The global trade credit insurance market is concentrated in three large continental European groups: Allianz Trade (formerly Euler Hermes), Coface and Atradius. These three together write approximately 80% of the global private trade credit insurance market. Lloyd’s of London and a handful of US and other Asian insurers complete the private market. State-supported export credit agencies (in the UK, UK Export Finance — UKEF) provide complementary cover for export trade, particularly for longer-term and politically sensitive transactions [4][6].
Trade credit insurance is a class of credit and suretyship insurance (Solvency II Classes 14 and 15) subject to prudential regulation by the Prudential Regulation Authority and conduct regulation by the Financial Conduct Authority. The Insurance Act 2015 governs the duty of fair presentation and warranty rules for non-consumer contracts [1][7].
Trade credit insurance is a commercial product not subject to the Consumer Insurance (Disclosure and Representations) Act 2012, which applies only to consumer policies. The commercial duty of fair presentation under the Insurance Act 2015 applies, with the insured required to make a fair presentation of the risk to the insurer including all material circumstances known or which ought to be known by the insured [2][8].
For export credit insurance, the OECD Arrangement on Officially Supported Export Credits sets disciplines for state-supported export credit agencies including UKEF. The Arrangement covers minimum premium rates, maximum repayment terms, minimum down payments and other terms of officially supported export financing. The disciplines apply to UKEF and other OECD ECAs but not to private trade credit insurers [9].
UK trade credit insurance is also subject to the broader regulatory environment for credit and lending, including the consumer credit regime under the Consumer Credit Act 1974 (which applies to certain regulated agreements but not to commercial credit insurance per se) and the Companies Act 2006 provisions on company accounts and insolvency. Disputes over trade credit claims often turn on the precise characterisation of the buyer’s financial position and the timing of insolvency events [3][10].
A trade credit insurance buyer typically approaches the market through a specialist broker with detailed disclosure of its sales ledger: customer-by-customer balances, payment history, sales volumes and credit terms. The insurer’s underwriting team assesses the credit risk of each named buyer using its proprietary credit risk database and grading systems. Credit limits are set for each buyer reflecting both its individual creditworthiness and the insured’s commercial relationship with the buyer [4][5].
The policy provides cover for sales up to the credit limit for each buyer. If the insured ships goods or services to a buyer in excess of the credit limit, the excess is uninsured. The credit limits can be increased on application to the insurer (subject to underwriting), reduced unilaterally by the insurer (typically with notice to the insured), or withdrawn entirely if the insurer becomes concerned about the buyer’s financial position. The credit limit management process is the heart of the insurer’s risk management and is a significant part of the value to the insured [4][5].
In the event of a buyer insolvency or protracted default, the insured notifies the insurer in accordance with the policy procedures and submits a claim. The insurer pays the insured percentage of the loss (typically 85%–90% of the gross debt, with the insured retaining 10%–15% as a ‘co-insurance’ to maintain commercial alignment) and takes subrogation rights to pursue recovery against the buyer. Recovery from an insolvent buyer typically follows the relevant insolvency proceedings and can produce material recoveries (with dividends ranging from a few pence in the pound to substantial percentages depending on the case) [4][5].
The market is highly cyclical and responds rapidly to macroeconomic conditions. During the 2008-09 financial crisis the global trade credit insurance market contracted sharply with widespread credit limit withdrawals and rate increases; the cycle has repeated to varying degrees in the 2020 COVID-19 period and the 2022 inflation and geopolitical shock. The cyclicality affects both pricing and availability of cover [4][5].
Domestic credit insurance: cover for sales to buyers in the insured’s home country.
Export credit insurance: cover for sales to buyers in foreign countries, typically including political risk extensions.
Whole turnover policy: cover for all or most of the insured’s commercial trade.
Specific account policy: cover for a particular buyer or small number of named buyers.
Excess of loss credit insurance: cover for aggregate annual loss above a substantial deductible (typically equal to the insured’s expected bad debt provision), used by large companies with significant retained credit risk.
Top-up credit insurance: additional cover above the credit limits provided by the primary insurer, typically purchased from a different insurer to spread concentration risk.
UK Export Finance and other state export credit agency cover: state-supported alternative or complement to private market cover, particularly for longer-term and politically sensitive transactions.
Single risk credit insurance: cover for a single transaction or short series of transactions, often used for project finance and major capital goods exports.
A UK manufacturer of industrial machinery exports approximately £35m of goods per annum to commercial buyers across the UK, EU and selected international markets. The company places trade credit insurance through a specialist broker with one of the major continental European insurers. The whole turnover policy provides cover for 90% of qualifying debts up to credit limits set by the insurer for each buyer; aggregate annual premium is approximately £140,000 (0.4% of insured turnover). During the policy year, one of the company’s UK buyers (a mid-market engineering firm) enters administration with an outstanding debt of £450,000. The insurer pays 90% of the gross debt (£405,000) less the policy deductible, taking subrogation rights to pursue recovery from the administrator. Figures in this example are illustrative.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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