Axis Capital Group

Importance of Credit Risk Insurance

Axis Capital, a group of companies based in Bermuda with 29 branches worldwide, provides customized insurance coverage –i.e. credit risk insurance. Credit risk insurance is a proactive management tool that best helps you in the following specific areas:


Catastrophic loss protection: Through most industries and companies of all sizes, worldwide, from the United States in the West or may it be Jakarta Indonesia in SE Asia, it is commonly true that the top 20% of accounts represent about 80% of the company's revenue. There are some situations that the focus of credit exposure among only few or even one key customer is even bigger. Just one sudden, unpredicted loss could have an overwhelming effect on the business.


Safe sales expansion: It is common for customers to wish more credit than you are comfortable giving them, or to have new customers you unfamiliar with search for meaningful amounts of credit from you. Warning! If you are limiting sales as a result of concern over the risk, credit insurance is an ideal answer, whereas you may invest in a professional credit practice to review these requests and manage the exposures.


Credit decision support: As discussed earlier, in most cases, the underwriters on your credit insurance policy are going to vigorously research, favor and monitor the accounts you want to insure. Having an industry specific financial analyst responsible to work for you as part of your credit risk insurance program augments much expertise to your credit practice, or provides you, to a specific degree, with an outsourced credit department. This lets you center your internal resources more on cash flow management and collections work.


Borrowing enhancement: Credit risk insurance can provide additional protection to the lender so they may have the chance to improve the borrowing arrangements if the company borrows against its receivables. They make this possible by increasing the percentage they will advance against insured accounts, and/or roping more accounts into the borrowing base- large concentrations, slow payers, export customers, etc. This lets you to make the most of the amount of working capital available from the similar pool of receivables. Credit insurance is the best approach to resolve the problem if you're in a high growth mode and find yourself in need of more working capital.


Exporting on open credit: Export credit risk insurance is one instrument you can practice to offer competitive open credit terms without the additional risk. The risk of granting credit terms has to be balanced against maintaining competitive terms against other sellers because more and more companies are sourcing customers outside their own borders.