While most businesses insure their fixed assets, many overlook the risk of non-payment by the buyer. There may be buyer, country or political reasons for non-payment.
As an exporter, you can take out export credit insurance. This protects against non-payment and is an important tool in credit management. It means you can sell more goods or services on credit terms and increase your borrowing power. However, it should not replace good credit management practices. Search for a financial export credit insurer on the British Insurance Brokers Association (BIBA) website (link is external).
Export insurance policy
An export insurance policy insures an exporter against the risk of not being paid under an export contract. It may also cover the risk of not being able to recover the costs of performing that contract because of specified reasons. Typically, such policies cover up to 95 per cent of the value of the contract and each policy will set out the risks it covers. You can purchase an export insurance policy from a private export credit insurer. To find a broker, you can contact the BIBA Consumer Helpline on Tel 0870 950 1790.
If you have not been able to purchase an export insurance policy privately, you may be eligible to apply for one to UK Export Finance, if you meet all of the following criteria:
you carry on business in the UK
your buyer is overseas
if the manufacturing period under the contract plus any period of credit you have given to the buyer total less than two years, the buyer must not be in an EU country or in certain other high income countries
the export contract value must be at least £20,000 or the equivalent in foreign currency
if the contract is not for semi-capital or capital goods and related services, you must first have attempted to obtain insurance from a private export credit insurer
To find out whether your business is eligible for export insurance, contact UK Export Finance Enquiry Line on Tel 020 7512 7887.
You can download a quick guide to export insurance from the UK Export Finance website (PDF, 587K) (link is external).
You can find the application form for an export insurance policy on the UK Export Finance website (link is external).
Bond insurance
Many buyers abroad ask sellers for bonds or bank guarantees in case the seller doesn't keep to their side of the contract on quality or performance after receiving advance payments.
Most export-related bonds are payable on demand, so pose a risk for UK exporters. Outbreak of war, for example, or overnight imposition of trade embargoes can lead to the calling-in of a bond. A bond insurance policy will protect you against these risks.
UK Export Finance offers bond insurance where the exporter, the buyer and the bond meet the following criteria:
the exporter must be carrying on business in the UK
the buyer must be in a country outside the UK
where the validity period of the bond is less than two years, the buyer must not be in a European Union country or certain other high income countries
UK Export Finance must have agreed to provide a buyer credit facility, a supplier credit facility or an export insurance policy for the contract that the bond relates to
the bond must not be a tender or bid bond or a bond given for contract payments that are aid funded by the UK government
If your business does not meet the above criteria, you can ask a private credit insurer for a quote. Find a financial export credit insurer on the BIBA website (link is external).
Find bond insurance information and application form on the UK Export Finance website (link is external).
Tender exchange rate indemnity
This insurance will protect you against adverse exchange rate movements when tendering for contracts in a foreign currency. If the currency weakens between submission of your firm tendering and winning the contract, you could lose a lot of money.
Some private credit insurers offer this insurance.
