Offering open account or deferred payment terms can win orders — buyers in many markets expect them. But shipping goods before being paid exposes you to the risk that the buyer never pays. Export credit insurance protects against that risk, letting you offer competitive terms without betting the business on each buyer.
What Export Credit Insurance Covers
Policies generally cover two types of risk:
Commercial Risks
- Buyer insolvency or bankruptcy
- Protracted default — the buyer simply does not pay within a set period after the due date
Political Risks
- Currency transfer restrictions preventing the buyer from paying
- War, civil unrest, or other political events
- Cancellation of import licences or government actions that prevent the transaction
Cover usually applies to a percentage of the loss — commonly a high proportion, with you bearing the rest.
What It Usually Doesn't Cover
- Disputes about quality or quantity, until resolved in your favour
- Losses from breaching your contract or insurance policy terms
- Sales to buyers without an approved credit limit
- Exchange rate losses
How Credit Limits Work
The insurer assesses each buyer and approves a credit limit — the maximum amount they will cover for that buyer at any time. The insurer monitors buyers continuously and may reduce or withdraw limits if a buyer's risk increases. This monitoring is valuable in itself: it gives you an early warning about buyers in difficulty.
💡 Use the insurer's view of your buyers
If an insurer refuses or cuts a credit limit on a buyer, treat it as serious information. It may be a sign to move that buyer to secure payment terms, even if you decide not to insure.
Types of Policies
- Whole turnover: covers all or most of your export receivables — usually the most cost-effective
- Key buyer or single buyer: covers one or a few important buyers
- Single transaction: covers one large contract
Who Provides It
Export credit insurance is offered by private trade credit insurers and by export credit agencies. In Pakistan, check what the EXIM Bank of Pakistan offers, alongside private insurers and brokers. Your bank may also have relationships with insurers.
Costs
Premiums depend on your turnover, buyers, countries, payment terms, and claims history. They are typically a small percentage of insured turnover. Include the cost in your pricing, and compare it with the cost of LCs or the potential loss of a buyer default.
How Credit Insurance Helps Finance
Banks are often more willing to finance receivables that are insured. Some lenders will advance funds against insured invoices or accept the policy as security. See export finance options.
Making a Claim
- Follow the policy's rules on overdue reporting — usually within a set time after the due date
- Take agreed collection actions
- Keep full documentation: contracts, invoices, shipping documents, correspondence
- File the claim within the time limit
Failure to report overdue payments on time is one of the most common reasons claims are reduced or refused.
When Credit Insurance Makes Sense
- You offer open account or D/A terms
- Your receivables are concentrated in a few large buyers
- You export to markets with higher political or economic risk
- You want to grow with new buyers without LCs
- You want easier access to post-shipment finance
Frequently Asked Questions
What does export credit insurance cover?
It typically covers non-payment by buyers due to insolvency or prolonged default, and political risks such as currency transfer restrictions, war, or government actions.
How much does export credit insurance cost?
Premiums vary by turnover, buyers, countries, and payment terms, and are usually a small percentage of insured sales. Get quotes from insurers or brokers.
Does credit insurance cover quality disputes?
Generally not until the dispute is resolved in the exporter's favour. Insurance covers the buyer's failure to pay valid debts, not disagreements about the goods.
Want Safer Terms on Your Next Deal?
Hexaco Global helps exporters structure quotations, payment terms, and documentation so deals close without putting your cash at risk. Tell us about your buyer — we reply within 24 hours.
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