Why Now Is an Important Time to Consider Trade Credit Insurance

In today’s rapidly evolving economic landscape, Irish businesses face unprecedented challenges. The confluence of rising tariffs, a volatile stock market, and fragile international relations underscores the critical need for robust financial safeguards. Among these, trade credit insurance emerges as a pivotal tool to ensure business stability and growth.​

Rising Tariffs, Falling Stock Market, and Fragile International Business and Geopolitical Relations Enhance the Need for Trade Credit Insurance

The global economic environment has become increasingly unpredictable. Rising tariffs have disrupted traditional trade routes, leading to increased costs for Irish exporters and importers alike. Concurrently, stock market fluctuations reflect underlying economic uncertainties, impacting consumer confidence and spending patterns. Additionally, geopolitical tensions have strained international business relationships, making cross-border transactions more precarious. In this context, the risk of customer insolvency or default has heightened, making trade credit insurance not just advisable but almost essential.​

What Is Trade Credit Insurance?

Trade credit insurance protects businesses against losses from non-payment of commercial debt. It ensures that companies receive payment for goods or services sold on credit terms, even if a customer defaults due to insolvency or protracted default. This type of insurance is vital for maintaining healthy cash flow and safeguarding against bad debts. Policies can often offers benefits such as increased access to finance, strategic support, and a healthier balance sheet by reducing the need for bad debt provisions.

What Type of Business Should Consider Trade Credit Insurance?

Any business that extends credit to customers can benefit from this insurance cover. This includes small enterprises to large corporations across various sectors. Companies engaged in domestic and international trade, particularly those operating in industries with high default rates or those looking to expand into new markets, should strongly consider this protection. As noted by many business experts, even with thorough customer reliability checks, the current economic climate makes credit insurance more important than ever. ​

Why You Should Use a Broker

Navigating the complexities of trade credit insurance policies can be daunting. A specialised broker brings expertise in assessing your business’s unique risks and tailoring coverage accordingly. They have access to a broad range of insurers and can negotiate favourable terms on your behalf. Moreover, brokers provide ongoing support, helping you manage claims and adjust coverage as your business evolves. 

We Have a Strong Balance Sheet and Good Reserves; Do We Need Trade Credit Insurance?

While a robust balance sheet and healthy reserves indicate financial strength, they don’t immunise a business against the repercussions of significant bad debts. This type of insurance acts as a proactive measure, preserving your financial health by mitigating unforeseen losses. It also enhances your borrowing capacity, as insured receivables are often viewed more favourably by lenders and can improve access to finance by providing reassurances to banks. ​

What Is the Difference Between Invoice Finance and Credit Insurance?

Invoice finance and trade credit insurance serve different purposes. Invoice finance involves selling your accounts receivable to a lender at a discount to access immediate cash flow. In contrast, trade credit insurance protects against the risk of non-payment by your customers. While invoice financing accelerates cash flow, it doesn’t safeguard against customer default; trade credit insurance does. Combining both can offer comprehensive financial protection and liquidity management.​

How Much Does It Cost?

The cost varies based on factors such as your industry, turnover, customer base, and credit management practices. Premiums are typically calculated as a percentage of insured turnover, generally ranging from 0.1% to just over 1.0%. For example, customers may pay between 10 and 15 cents for every €100 insured.This investment not only protects against bad debts but also supports business growth by enabling safer credit extension to customers.​

The Irish Context: Why Trade Credit Insurance Is Essential Today

Recent data underscores the growing importance of trade credit insurance in Ireland. Research shows that in 2023 there was a significant deterioration in B2B payment practices, with payment delays increasing by 20% and bad debts nearly doubling. Late payments now affect an average of 58% of all B2B invoiced sales, posing a clear threat to business liquidity.  This trend highlights the escalating credit risk landscape, making it a critical tool for Irish businesses to safeguard their financial stability.

So what is your take away from this article, the current economic climate, marked by rising tariffs, market volatility, and geopolitical uncertainties, amplifies the need for Irish businesses to consider cover. This protective measure not only shields against potential bad debts but also empowers companies to navigate challenges confidently, ensuring sustained growth and financial resilience.​

Contact us today to learn how we can help safeguard your business in 2025 and beyond.

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