Trade Credit Insurance and Ziegler ZA Trade Finance

Trade credit insurance is a credit risk mitigation tool built for businesses to help protect the bottom line from bad debt write-offs and facilitate expansion for company growth and prosperity.

Trade credit insurance is one of the cornerstones. Ziegler ZA has built its credit risk policy to extend and maintain trade finance limits to new and existing import clients.

The trade-credit insurance industry worldwide was adversely affected by the Covid pandemic, and trade credit insurers were required to reassess processes and assessment criteria.

The hard lockdown imposed in South Africa from March 2020 made it far more difficult for credit insurance clients to obtain limits.

Turnaround times for limit assessments were drastically affected as far more information was required, and credit committees had an influx of debtors to review.

A few months into the pandemic, clients were forced to accept that the risk had increased far beyond expectations and that they not only had to accept the requirements for a full assessment to be conducted but that declined or reduced limits were justified.

Small to medium enterprises were particularly affected by this change in the credit assessment process. Limits were declined regularly, and for many companies, this meant that credit could not be extended to debtors who had typically utilised such facilities.

In the post-Covid era, credit insurers have experienced a surge in claims. Credit Guarantee Insurance Company, for instance, had to employ five more staff members to assist with claims processing and payment and had advised that the claims department had too many claims to process timeously. While this drastically slowed down the payment of claims to clients, it nevertheless provided clients and brokers with the reassurance that CGIC was striving to alleviate the problems at hand.

Credit insurers are now investigating claims much more thoroughly. As economic activity has once again started to gather momentum with the easing of lockdown, claims volumes have reduced. It is expected that underwriting for larger corporate clients will become slightly less restricted. However, risks and high exposures will be monitored continuously.

Applications will require all necessary documentation such as the latest audited financial statements, latest management accounts, debtors’ and creditors’ age analysis, and purchase and payment histories, depending on what documentation and information the credit insurer has on the debtor at the time of the application.