Home Trade credit insurance: what is it? The cost of credit insurance

The cost of credit insurance

Find out how credit insurance is priced and what factors influence its cost.

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How is pricing structured for a credit insurance policy?

The pricing of a credit insurance policy may be based on a fixed premium defined at the start of the contract, but in most cases it is calculated on the basis of insurable turnover to which the insurer applies a premium rate.

Premium rate

A percentage defined by the insurer for the duration of the policy. It is calculated according to the level of risk represented by the insured’s buyer portfolio (past claims experience), the industry sector, the countries where insured buyers are located, and the volume of insurable turnover.

Minimum premium (MP)

The minimum premium amount charged for one insurance year. It is generally set at 80% of the estimated premium calculated on the projected insurable turnover.

Payout limit

The maximum cumulative amount of indemnities the insurer may pay during the insurance period. This limit may be defined as a fixed amount or as a multiple (for example, 30 times) of the premium paid.

Frequency of turnover declarations

Monthly / quarterly / annual. Turnover declarations must be submitted through the insurer’s portal and are generally reported by country. They serve as the basis for calculating the insurance premium.

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Credit insurance premium invoicing

There are two different calculation methods:

  1. Turnover declaration with invoicing based on the declared amount: Declared turnover × policy premium rate → adjustment invoice issued at the end of the insurance period if the amount paid is lower than the minimum premium defined in the policy.
  2. Turnover declaration with invoicing based on the minimum premium (advance premium): The premium is invoiced based on the minimum premium (MP) defined in the policy. Example: if declarations are quarterly, then: MP ÷ 4 = quarterly advance premium payment → adjustment invoice issued at the end of the insurance period if the declared turnover over the period × premium rate exceeds the advance premiums already paid.

What is insurable turnover and how is it calculated?

Insurable turnover corresponds to the total turnover generated during the insurance period from customer invoices covered by a full or partial credit approval, minus:

  • sales or services provided to private individuals
  • sales or services carried out with related companies
  • prepaid deliveries
  • invoices issued to customers for whom the insurer has refused to grant coverage (credit limit = €0)
  • invoices issued to customers whose credit approval has been withdrawn and for whom the outstanding order period has expired

Day-to-day policy management

The insurer also charges investigation and monitoring fees (IMF).

  • Investigation fees: Fees applied for each new credit approval request.
  • Monitoring fees: Monthly fees charged for each active credit approval.

These investigation and monitoring fees are invoiced monthly and are calculated according to the buyer’s country risk zone.