Trade credit insurance protects a business against customers who do not pay what they owe on credit terms. That happens when they become insolvent or simply fail to pay for an extended period. The insurer sets a credit limit for each customer and pays an agreed percentage of an insured debt, usually 75% to 95%, after a claim.
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
- Trade credit insurance covers unpaid invoices when a customer becomes insolvent or stays in default beyond an agreed waiting period.
- According to the International Credit Insurance & Surety Association, a policy usually pays 75% to 95% of the outstanding debt, depending on the cover.
- According to Accountants Daily, reporting ASIC's statistics, 14,152 Australian companies entered insolvency for the first time in 2025-26.
- Disputed debts are not covered: the debt has to be valid and legally enforceable.
- Cover is written by specialist credit insurers in Australia and New Zealand, often through specialist brokers.
What is trade credit insurance?
Trade credit insurance is cover for a business that sells on credit terms against the risk that a customer, called the buyer, does not pay. It responds when the buyer becomes insolvent or fails to pay for an extended period, known as protracted default. Export policies can also cover political risk, such as money that cannot leave the buyer's country.
The International Credit Insurance & Surety Association says it insures "manufacturers, traders and providers of services" against non-payment. It is a business-to-business product. It should not be confused with consumer credit insurance, which covers a borrower's loan repayments.
For many businesses, accounts receivable are among the largest assets on the balance sheet. A single large customer failing can wipe out a year's profit. Trade credit insurance turns that unpredictable loss into a known premium.
What does trade credit insurance cover, and what does it not?
Trade credit insurance covers insured debts left unpaid through the buyer's insolvency or protracted default. Export cover can add political events. It does not cover disputed debts, sales above the buyer's credit limit, or losses the business knew about before it supplied.
- Buyer insolvency, once the liquidator or administrator accepts the debt. Usually not covered: Debts in dispute over the quality or delivery of goods.
- Protracted default, after the waiting period set in the policy. Usually not covered: Sales above the buyer's approved credit limit.
- Political risk on export policies, where purchased. Usually not covered: Buyers the business knew were in difficulty before supplying.
- The insured percentage of the debt. Usually not covered: The uninsured share, usually 5% to 25%.
The dispute exclusion matters most in practice. According to a World Bank primer, a supplier needs "a valid and legally enforceable debt against the buyer" that can pass to the insurer. Until a dispute is settled in the supplier's favour, the debt is not an insured sale.
How does a trade credit insurance policy work?
A policy usually covers the business's whole turnover on credit, or a named set of buyers. The insurer sets a credit limit for each buyer, which is the most it will cover. The business reports overdue accounts on time, pays a premium based on its turnover, and carries the uninsured share of any loss.
Credit limits. The insurer approves a limit for each buyer, and can reduce or cancel it if the buyer's position worsens. Many policies also allow a discretionary limit for trading with a new buyer up to a set amount.
Insured percentage. No policy covers the full debt. According to the World Bank primer, cover normally does not exceed 85% to 90% of losses. So the business always shares in a loss and stays motivated to manage credit well.
Overdue reporting. The business must tell the insurer when an account passes a set number of days overdue. Missing that deadline is a common reason claims fail, so it is worth building into the collections process.
Premium. According to the World Bank primer, premiums are usually based on insured turnover and loss history. Most policies renew annually.
How does a trade credit claim work?
A claim starts when a buyer becomes insolvent or stays unpaid past the waiting period. Next, the business lodges the claim with its documents: invoices, proof of delivery, statements and correspondence. The insurer assesses it and pays the insured percentage. It then takes over recovery from the buyer or the insolvent estate.
The waiting period for protracted default is set by each policy. According to the World Bank primer, it is typically between 60 and 180 days, during which the supplier must try to collect. For insolvency, the receiver or liquidator usually has to acknowledge the debt first.
After payment, the insurer has the right of subrogation, meaning it can pursue the buyer for the debt. Any recovery is usually shared between insurer and business in line with the insured percentage. The trade credit claims process walks through each step.
Who sells trade credit insurance in Australia and New Zealand?
Trade credit insurance in Australia and New Zealand is written by specialist credit insurers and placed mostly through specialist brokers. Allianz Trade, Coface and Swiss Re Corporate Solutions all write the cover in the region. In 2026, Swiss Re bought QBE's global trade credit and surety business, which is strong in both markets.
Allianz Trade operates in Australia through Euler Hermes Australia Pty Ltd, an authorised representative of Allianz Australia Insurance Limited, as its site states. According to Insurance News, Swiss Re Corporate Solutions finalised its purchase of QBE's trade credit and surety operation in 2026. In addition, Coface has an Australian branch.
Some cover is also written through underwriting agencies under delegated authority from an insurer. The delegated authority guide explains how that works. In New Zealand, insurers must be licensed by the Reserve Bank, and members of the Insurance Council of New Zealand follow its Fair Insurance Code.
Who uses trade credit insurance?
Trade credit insurance suits businesses that sell on credit to other businesses and hold much of their assets in receivables. Typical users are wholesalers, manufacturers, distributors, exporters and service firms with big customers. It can also help a business borrow, because lenders often value insured receivables more highly.
Insolvency levels make the case. According to Accountants Daily, reporting ASIC's statistics, 14,152 companies entered insolvency for the first time in 2025-26, compared with 14,722 the year before. Construction was the worst-hit industry. Every one of those failures left suppliers holding unpaid invoices.
It is not the only option. Some businesses set aside a bad debt provision and accept the risk. Others use factoring, where a finance company buys the invoices, sometimes with credit protection included. Trade credit insurance suits businesses that want to keep their customer relationships and still cap the loss from any one buyer.
Who handles trade credit insurance claims?
Trade credit claims are handled by the claims teams of the credit insurers and of any underwriting agencies writing the cover for them. Those teams track overdue reports, waiting periods, documents, payments and recoveries for many buyers at once. That makes structured processes and systems important.
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
What does trade credit insurance cover?
Trade credit insurance covers a business against customers who fail to pay insured debts because they become insolvent or stay in default beyond the policy's waiting period. Export policies can also cover political risk. It pays an agreed percentage of the debt, usually 75% to 95%, up to the credit limit set for that customer.
How does trade credit insurance work?
The insurer sets a credit limit for each customer and the business sells on credit up to that limit. If a customer becomes insolvent or stays unpaid past the waiting period, the business lodges a claim with its documents. The insurer pays the insured percentage, then pursues recovery from the customer.
What is protracted default?
Protracted default is when a buyer does not pay an undisputed debt for an extended period but has not formally become insolvent. A trade credit policy covers it after a waiting period set in the policy, typically between 60 and 180 days, during which the supplier must keep trying to collect.
Is trade credit insurance worth it for a small business?
It can be, for a small business with a few large customers whose failure would cause serious harm. Costs include the premium and the uninsured share of any loss. A business with many small customers, or strong cash reserves, may prefer to self-insure through a bad debt provision instead.
What is the difference between trade credit insurance and debtor insurance?
They are usually the same thing. Debtor insurance is another name for trade credit insurance, covering a business against customers who fail to pay what they owe. Both differ from consumer credit insurance, which covers an individual borrower's loan repayments if they cannot pay because of illness, injury or job 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.
- What is an underwriting agency?: the agencies that write much specialist cover.
- Code of Practice claims rules: which claims timeframes apply to which products.
Sources
- International Credit Insurance & Surety Association. "Trade credit insurance." Checked 22 October 2026. https://icisa.org/trade-credit-insurance/
- 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
- 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 News. "QBE completes sale of trade credit business." 7 September 2026. https://www.insurancenews.com.au/corporate/qbe-completes-sale-of-trade-credit-business
- Allianz Trade. "Allianz Trade in Australia." Checked 22 October 2026. https://www.allianz-trade.com/en_AU/about-us/allianz-trade-in-australia.html
