How non-cancellable trade credit insurance offers organisations a competitive edge in uncertain times
Many industry sectors have supply chains that have thin margins and are vulnerable to even slight changes in the cost of goods, making access to affordable trade credit insurance essential. "Many of our clients are navigating an increasingly challenging operating environment," says Rafael Garcia Colorado, head of trade credit at AIG Spain. "Trade wars and rising tariffs, commodity price fluctuations and geopolitical uncertainties - such as Brexit - have all increased demand for trade credit insurance."
In the case of traditional trade credit products however, insurers regularly review credit limits on their clients' customers and may, from time to time, reduce or remove those limits to reflect changing risk in the wider environment. Such actions can disrupt trading relationships and make it difficult for organisations to win new customers.
In extremely competitive industries where winning a customer can take as much as a year, changes to new customers' credit facilities can put an immediate strain on relationships. It can also create additional work for credit control teams.
AIG’s Non-Cancellable Trade Credit Policy was designed to mitigate these issues by empowering companies to maintain their trade flows and protect their relationships with key customers. Available to organisations with a different approach to risk management, non-cancellable cover reassures policyholders and their customers that credit limits will remain unchanged for the entire year.
This certainty offers sales teams more freedom and confidence in their negotiations with prospective customers, while helping build stronger relationships with existing buyers. The result is a tangible improvement in sales and more predictable trade flows, even during volatile times. "By partnering with an insurer that has the capability to commit to trade credit limits, clients are reassured their trading partnerships will be protected and enhanced, whatever is happening in the macro environment," says Garcia Colorado.
"Over the past year we have seen a steady rise in demand for our non-cancellable product, which speaks to the value it offers clients as they look for innovative ways to protect their trading relationships in uncertain times," he adds.
Because AIG’s Non-Cancellable Trade Credit Insurance involves a level of risk-sharing between AIG and the policyholder, the onus falls on policyholders themselves to carefully assess the risk of allocating credit to a specific buyer and to decide whether to sell to that firm. This risk partnership approach between insurer and insured empowers the client and encourages a diligent approach to sales.
“AIG’s Non-Cancellable Trade Credit Policy is for every company looking for autonomy and stability in their risk management,” says Garcia Colorado. AIG has developed different policy protections for a wide range of companies, from SME’s to Multinationals, offering the option of non-cancellable limits and solutions for each company’s level of risk control.