Find out more about the latest developments in credit risk management for your industry.

Logo Created with Sketch. SCHUMANN - EN

Credit risks in times of crisis

At irregular intervals, we answer specific questions about credit risks in the era of COVID-19, this time on how to deal with cancelled or reduced credit insurance limits.
Blog Post

What to do with cancelled or reduced credit insurance limits?

Limit reductions through trade credit insurance for own customers are always a warning signal. Obviously, the debtor's financial situation has deteriorated significantly.

Usually, it is best to contact the customer directly to find out for yourself what the financial situation of the debtor is like.

If the limit has been completely cancelled by the credit insurance, you will only deliver to the customer against prepayment or, as an alternative, you will only resume delivery once the customer has provided security.

With reduced credit limits, payment terms can be shortened if you do not want to bear the risk yourself, which is now uncovered while sales volumes remain constant, or if you do not want to reduce sales with the customer. Demanding (additional) collateral would also be a further measure to maintain the volume of sales and the terms of payment with the customer.

Finally, you could also try to close the risk coverage gap by means of so-called top-up credit insurance. To this end, such a contract offers the possibility of obtaining an additional cover commitment, usually from a second insurer, which supplements the basic credit limit. However, the additional fees that arise must also be taken into account.