A major current asset on many companies' balance sheets is
trade receivables; that is, money owed for goods or services
provided on credit terms.
But what good is a sale if you don't get paid? Significant
cash flow implications arise when debtors don't pay, and
failure to manage them can be fatal to a business.
For this reason, many companies rely on trade credit insurance
to protect against losses on "uncollectable" receivables.
Like other forms of insurance, this transfers, at a cost in the
form of premiums, credit risk away from the company to the
insurer.
As with the banking industry, insurance companies have come
under the microscope recently. Recommendations around their trade
credit insurance practices will likely have far reaching effects on
how businesses should now operate. In this article, we consider the
recommendations, the reaction to them from insurance companies, and
the implications for business.
