Blogs
How Trade Credit Insurance Works
When exporters sell on credit terms, there is a gap between shipping goods and receiving payment. During this period, the exporter carries the risk.
Trade Credit Insurance works by protecting exporters during this time, when goods have been delivered but payment has not yet been received.
How does Trade Credit Insurance work?
Trade Credit Insurance provides protection against non-payment caused by buyer insolvency or prolonged non-payment. The insurance applies to sales made on agreed credit terms.
In simple terms, it covers the risk that arises after shipment and before payment.
Where does it fit in the trade process?
The trade process typically looks like this:
- An exporter agrees to sell goods on credit terms
- Goods are shipped to the buyer
- Payment is expected at a later date
Trade Credit Insurance applies during the period between shipment and payment, when the exporter is exposed to payment risk.
A simple example
A UAE exporter sells goods worth AED 1.2 million to an overseas buyer on 60-day payment terms.
The goods are delivered as agreed, but the buyer later experiences financial difficulty and does not pay on time.
With Trade Credit Insurance in place, the exporter has a mechanism to manage this non-payment risk instead of absorbing the full loss.
How Etihad Credit Insurance (ECI) helps
Etihad Credit Insurance (ECI) supports exporters by:
- Providing protection against non-payment
- Helping businesses manage receivables risk
- Supporting continuity when unexpected payment issues arise