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ARTICLE · 13 JULY 2022

Protecting against fraud in trade finance

Holding Redlich
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Holding Redlich

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A recent decision ordered a trade credit insurer to pay out an insurance claim to a financier defrauded by a customer.

AustraliaInsurance
Nathan Cecil
Nathan Cecil
Isabella Costa
Isabella Costa
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The decision in Thera Agri Capital No 2 Pty v BCC Trade Credit Pty Ltd t/as The Bond & Credit Co [2022] NSWSC 669 handed down last month ordered a trade credit insurer to pay out an insurance claim to a financier defrauded by a customer.

Trade credit insurance is a product that indemnifies a seller against losses from non-payment of a commercial trade debt. It covers all contracts entered into or goods and services provided on credit terms within the policy period. The insurer agrees to pay a percentage of an outstanding invoice or receivable owed arising from a customer's insolvency, bankruptcy or "protracted default" (overdue contract payment). 

In this case, the insured purchased trade credit insurance which provided cover for supply chain finance it gave to an international customer to fund the shipment of agricultural commodities overseas under an Islamic "Murabaha" finance contract. The customer submitted false documents, on the basis of which the insured

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