Home Trade credit insurance: what is it? The different types of credit insurance policies Excess of Loss policy

Excess of Loss policy (XoL)

What is an Excess of Loss credit insurance policy?

The Excess of Loss policy is a form of credit insurance designed to indemnify losses above a deductible defined in the contract. This type of policy protects a company against “exceptional” losses linked to customer non-payment.

The insurer only intervenes once a certain loss threshold (annual deductible) is exceeded, as specified in the agreement. It therefore covers major claims while leaving the company responsible for managing routine credit risk.

Example: If a company has a self-insured retention of €500,000, losses up to that amount remain its responsibility. Beyond that threshold, the insurer compensates additional losses, up to the insured limit.

How does Excess of Loss credit insurance policy work?

Step 1

The company agrees to retain a certain amount of unpaid receivables and therefore assumes losses up to a predefined threshold.

Step 2

If the annual deductible is exceeded, the insurer covers the excess losses, within the payout limit defined in the contract.

Step 3

The coverage is generally global, meaning it applies to the entire customer portfolio without systematic individual credit assessment.

Benefits of Excess of Loss credit insurance policy

Protection against “exceptional” losses

Covers losses that exceed the company’s financial capacity.

Flexibility

The company retains full control over its credit policy and debt collection processes.

Suitable for large accounts

Well adapted to businesses with a broad and diversified customer portfolio.

Lower insurance cost

Compared with a whole turnover policy, as the company retains a share of the risk.

Increased confidence from investors and banks

Provides protection against major financial shocks, strengthening financial credibility.

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Who is the Excess of Loss policy for?

This type of policy is ideal for:

  • Large companies and multinational groups
  • Businesses with strong self-insurance capacity
  • Organisations with robust internal processes for managing accounts receivable and customer credit risk
  • Companies seeking protection against exceptional losses while maintaining full flexibility in their commercial credit management

Thanks to strong expertise, Fibus Trade supports you in setting up a perfectly tailored Excess of Loss policy.

Talk to our Fibus Trade experts

Frequently asked questions about Excess of Loss credit insurance policy.

What are the advantages compared to a global policy (whole turnover)?

  • Generally lower premium, as the company retains part of the risk
  • Greater flexibility in managing the customer portfolio, with fewer individual declarations
  • Targeted protection against “catastrophic” events (failure of major customers or multiple defaults)

However, it is not designed to cover isolated small receivables.

What are the insured’s monitoring obligations?

  • Maintain a strict internal credit policy

  • Keep reliable data on customers

  • Report any loss exceeding the retention threshold within the required deadlines

  • Provide regular reporting to the insurer (turnover, exposure, internal credit limits)

How is the XoL insurance premium calculated?

It is based on:

  • the level of retention chosen
  • the desired coverage capacity (indemnity limit)
  • the quality of the customer portfolio and geographic diversification

The premium is often expressed as a percentage of turnover or as a fixed annual amount.