Trade credit insurance is to protect the factor (or the bank) and the seller from risk of losses related to the buyer’s failure to pay for goods or services. The factor takes over all rights to pursue the buyer for payment. Coface insurance policy covers the risk of the buyer’s default regardless of where the buyer is - in Russia or abroad.
In the case of recourse factoring (trade finance) the non-payment risk is on the seller. If the seller gets credit risks insured, the factor can set higher limits.
In the case of non-recourse factoring (trade finance) the factor takes on the non-payment risk. Credit insurance leads to mitigation of the factor’s credit risks, which are ceded to the insurance company.
Insurance of trade receivables is especially relevant in two cases:
If the seller’s business grows steadily and requires higher limits of financing on a regular basis If the seller acquires many new customers (in case of company growth, or entering new markets)
Coface has a special insurance offer to banks and factors. With Coface credit insurance a bank or a factoring company has an opportunity to:
Offer their clients factoring services with higher limits per debtor Finance portfolios with a wider range of debtors Mitigate credit risks of the factoring portfolio Minimize efforts spent on assessment and monitoring of debtors’ solvency
Coface customers benefit from our competitive advantages. An insurance contract defines all rights and responsibilities of the Insurer and the Policyholder (see Insurance step by step). Every insurance contract is based on the General Conditions of the Comprehensive Trade Credit Insurance designed and applied by Coface around the world (GlobAlliance Contract).
