A trade credit claim arises when a buyer becomes insolvent or stays unpaid past the policy's waiting period. The insured business reports the overdue account, lodges the claim with invoices, proof of delivery and statements, and waits for assessment. The insurer pays the insured percentage, then pursues recovery. Missed deadlines are the main reason claims fail.
This article is general information, not legal or compliance advice. Check the current text of the code, standard or legislation, and take advice for your situation.
Key takeaways
- A claim has two possible triggers: the buyer's insolvency, or protracted default after the waiting period.
- According to a World Bank primer, the waiting period for protracted default is typically between 60 and 180 days.
- A policy usually pays 75% to 95% of the outstanding debt, according to the International Credit Insurance & Surety Association.
- According to Accountants Daily, reporting ASIC's statistics, 14,152 Australian companies entered insolvency for the first time in 2025-26.
- Late overdue reports, sales above the credit limit and disputed debts cause most declined claims.
When does a trade credit claim arise?
A trade credit claim arises in one of two ways. The first is insolvency: the buyer enters liquidation, administration or receivership, and cannot pay. The second is protracted default: the buyer simply does not pay an undisputed debt, and the account stays unpaid past the waiting period in the policy.
Insolvency is the clearer trigger. A formal appointment shows the buyer cannot pay. According to a World Bank primer on trade credit insurance, the receiver or liquidator usually has to acknowledge the debt as due and unpaid before the insurer pays.
Protracted default takes longer. The buyer may be trading but slow, or arguing over terms. So the policy gives the supplier a waiting period to collect before the insurer steps in. The guide to trade credit insurance explains how the cover works overall.
What are the steps in a trade credit claim?
A trade credit claim usually follows seven steps. The account goes overdue and is reported to the insurer. Supply may be stopped while the supplier keeps trying to collect. Next, the claim is lodged with documents and assessed. Then the insurer pays the insured percentage and, finally, pursues recovery.
- The account goes overdue. The supplier tracks the debt against its due date and its terms of trade.
- The overdue account is reported. Most policies require notice once an account passes a set number of days overdue. The exact deadline is in the policy.
- Supply is reviewed. Many policies expect the supplier to stop further credit to a buyer in default.
- Collection continues. During the waiting period, the supplier keeps chasing the debt.
- The claim is lodged. The supplier sends the claim with its documents, either after insolvency or once the waiting period ends.
- The insurer assesses it. It checks the debt is valid, within the credit limit and reported on time.
- The insurer pays, then recovers. It pays the insured percentage, and then pursues the buyer or the insolvent estate.
Policies differ on the detail, so each step should be checked against the wording. The steps above follow the general pattern set out by the World Bank primer.
What documents does a trade credit claim need?
A trade credit claim needs evidence that the debt exists, is owed and is unpaid. That usually means the invoices, the signed order or contract, proof of delivery, the account statement and the collection correspondence. For an insolvency, add the appointment notice and the liquidator's acceptance of the debt.
Delivery evidence often decides the claim. A signed delivery docket proves the goods arrived. Without it, the buyer can argue the debt is not owed.
Correspondence matters too. Emails and letters show the supplier chased the debt and that the buyer did not dispute it. Keeping them in one place, linked to the account, saves days at claim time.
How long does a trade credit claim take?
There is no single timeframe. For protracted default, the waiting period alone is typically 60 to 180 days, according to the World Bank primer. Assessment then depends on how complete the documents are. Insolvency claims can be faster, because the trigger is clear, but they depend on the liquidator accepting the debt.
The General Insurance Code of Practice is less relevant here than for home or motor claims. Its Part 8 claims timeframes apply to retail products, such as motor, home and travel insurance. Trade credit insurance is a business product, so its timeframes come mainly from the policy wording. The Code timeframes reference lists where the Code does apply.
Why are trade credit claims declined?
Trade credit claims are most often declined for four reasons: the overdue account was reported late, the sale went above the buyer's credit limit, the debt is in dispute, or the supplier kept trading after it should have stopped. Each is a breach of a policy condition rather than a question of the buyer's finances.
Late reporting is the most avoidable. A policy usually sets a deadline for reporting overdue accounts. Missing it can reduce or void cover for that buyer.
Disputed debts are the hardest. According to the World Bank primer, a supplier needs "a valid and legally enforceable debt against the buyer". So if the buyer says the goods were damaged or late, the claim waits until the dispute is settled.
Credit limits are a common trap as well. Sales above the approved limit are not insured. As a result, a supplier that kept shipping to a growing customer may find part of the debt uncovered.
What happens after a trade credit claim is paid?
After paying, the insurer takes over the right to recover the debt, known as subrogation. It pursues the buyer, or lodges a proof of debt in the insolvency. Any money recovered is usually shared between the insurer and the supplier in line with the insured percentage, because the supplier carried the uninsured share.
The World Bank primer describes subrogation as allowing the insurer to "stand in the shoes" of the supplier. In an insolvency, recovery depends on what the liquidator can pay unsecured creditors, which is often a small fraction of the debt.
Recoveries can arrive months or years after the claim. So both insurer and supplier need a record of what was paid and what is still owed, to share any dividend correctly.
What do credit claims teams need to run this well?
Credit claims teams need three things: deadlines tracked per buyer, so overdue reports and waiting periods are never missed; the document set for each claim in one place; and payments and recoveries reconciled against each claim. With many buyers per policy and many policies per insurer, those records multiply quickly.
Insolvency levels show the volume. According to Accountants Daily, reporting ASIC's statistics, 14,152 companies entered insolvency for the first time in 2025-26. Construction was the worst-hit industry. Each failure can trigger claims from several insured suppliers at once.
ClaimsGateway (claimsgateway.com) builds cloud claims software for insurers, underwriting agencies, brokers and TPAs in Australia and New Zealand. The ClaimsGateway underwriting agencies page describes its approach for agencies writing specialist lines.
Frequently asked questions
How long does a trade credit insurance claim take?
It depends on the trigger and the policy. For protracted default, the waiting period alone is typically 60 to 180 days before a claim can be paid. Insolvency claims can move faster, once the liquidator accepts the debt. Complete documents, lodged on time, shorten assessment in both cases.
What is the waiting period for protracted default?
The waiting period is the time a supplier must wait, while still trying to collect, before an unpaid undisputed debt counts as a protracted default claim. It is set in each policy. A World Bank primer describes it as typically between 60 and 180 days, so check your own wording.
What documents do I need for a trade credit claim?
You usually need the invoices, the signed order or contract, proof of delivery, the account statement and your collection correspondence. For an insolvency claim, add the notice of appointment and the liquidator's acceptance of the debt. Your policy and insurer may ask for more, so check the wording.
Why would a trade credit claim be declined?
The most common reasons are reporting the overdue account late, selling above the buyer's approved credit limit, a dispute over the debt, and continuing to supply after the buyer defaulted. Each breaks a policy condition. Tracking deadlines and limits for every buyer avoids most of them.
What happens to recoveries after a claim is paid?
After paying, the insurer takes over the right to recover the debt from the buyer or the insolvent estate. Money recovered is usually shared between the insurer and the insured business in line with the insured percentage, because the business carried the uninsured share of the loss.
About the author
ClaimsGateway builds cloud claims management software for insurers, underwriting agencies, brokers, TPAs and self-insured organisations in Australia and New Zealand. Every regulator figure in this article links to its source, and every vendor fact was checked on the vendor's own site on the date shown.
Related reading
- Trade credit claims software: claims systems for credit insurers and agencies.
- Code of Practice claims rules: which claims obligations apply to which products.
- Claims payment software: the payment and reconciliation step.
Sources
- Jones, Peter M. "Trade Credit Insurance." Primer Series on Insurance, Issue 15. World Bank, February 2010. https://documents1.worldbank.org/curated/en/951681468164986978/pdf/625150NWP0Trad00Box0361486B0PUBLIC0.pdf
- International Credit Insurance & Surety Association. "Trade credit insurance." Checked 22 October 2026. https://icisa.org/trade-credit-insurance/
- Accountants Daily. "Company insolvencies climb to 14,152 for FY2025-26." 22 July 2026. https://www.accountantsdaily.com.au/business/22687-company-insolvencies-climb-to-14-152-for-fy-2025-26 (reports ASIC's insolvency statistics)
- Insurance Council of Australia. General Insurance Code of Practice (2020 Code), Part 8. https://insurancecouncil.com.au/code-of-practice
