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Maximum Liability & Policy Exposure Explained
When exporters use trade credit insurance, understanding the limits of coverage is essential.
Two key concepts that define this are maximum liability and policy exposure.
What is maximum liability?
Maximum liability is the total amount an insurer will pay under a policy during a specific period.
It represents the overall cap on coverage, regardless of how many buyers or transactions are involved.
What is policy exposure?
Policy exposure refers to the total value of outstanding receivables at any given time.
It reflects how much risk the exporter is carrying across insured transactions.
Why does this matter?
Understanding these concepts helps exporters:
- Manage their overall risk level
- Avoid exceeding coverage limits
- Align insurance with their trading activity
A simple example
An exporter has a policy with a maximum liability of AED 5 million. At a certain point, their outstanding receivables across buyers reach AED 6 million.
This means part of their exposure may fall outside the insured limit.
How Etihad Credit Insurance (ECI) helps
Etihad Credit Insurance (ECI) supports exporters by:
- Structuring policies based on business size and activity
- Helping manage exposure within defined limits
- Providing clarity on coverage boundaries