A Credit Limit or an Indication? What do I need?

Credit limits are essential for cover under any Trade Credit Insurance Policy but they come in a few different forms.

• A written Credit Limit from Atradius
• A Credit Limit a customer has established themselves using their trading experience with the Buyer or a Credit Report
• A Credit Limit Indication

As we all know, for every Buyer, a customer must establish a Credit Limit before any date of loss for a Claim to be valid, whether that’s one issued by us or one that a customer has established themselves. The Credit Limit needs to be high enough to cover the largest outstanding amount with the specific Buyer at any point in time, any outstandings above the Credit Limit value of course, won’t be covered.

In addition to this we also know there are requirements under the policy with regards to total Credit Limit exposure. It’s important for customers to manage their exposure within the set limits of their individual policy for a few reasons;

• To remain within their maximum liability figure
• To keep capital costs low and help to control premium levels
• To ensure they have enough capacity at a policy level to cover all of their Buyers

We understand that often this exposure management can be difficult, especially when prudently, customers are applying for credit limits well in advance of a shipment or service being provided. It can also be tricky to manage when customers experience swings in order volumes through seasonal trade.

To try and help customers manage their exposure, Atradius can, on a case by case basis, provide Credit Limit Indications. They do what they say on the tin! A Credit Limit Indication is an indication of what cover would be given if the customer was to apply for a Credit Limit Decision, but crucially, it doesn’t count towards any exposure limits set under the policy. An indication is normally valid for 6 months as standard but this may vary based on the Buyer risk or Customer set up. It’s important to note though, if our customer receives a negative or zero Indication from us, this would constitute adverse information so any customer should chat to us about what can be done in this scenario.

We can explore whether we need to reach out to the Buyer for further information with a view to issuing either the Indication or a Credit Limit in full or we can also explore whether the customer can still continue to use their ability to establish their own Credit Limit.

When a customer is ready to trade they can also convert a Credit Limit Indication to a live Credit Limit Decision themselves via Atrium meaning the move to obtaining cover is seamless.

If you’d like more information on this or any of our Atradius processes, please reach out to your usual contacts and they will be happy to discuss.