Trade credit insurance
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An insurer pays the exporter most of an unpaid invoice when a foreign buyer fails to pay for a covered reason.
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01 · In plain words
You sell on credit, and the insurer pays most of the loss if the buyer fails to pay
protects a seller when a buyer fails to pay. When the seller is an exporter, it is often called . It protects the exporter against the risk that a foreign buyer does not pay (US International Trade Administration).
The exporter buys a policy from an insurer and pays a fee, called the premium. The exporter then ships and gives the buyer time to pay, on . If the buyer fails to pay for a reason the policy covers, the exporter makes a claim. The insurer then pays a set share of the unpaid invoice.
The policy covers two kinds of risk (US ITA):
- : the buyer goes bankrupt, becomes insolvent, or fails to pay for a long time.
- : war, terrorism, riots or revolution, a ban on changing or sending money, the government taking over property (expropriation), or changes in government rules.
The insurer pays a share of the loss, not all of it. The part you keep is called . The policy also leaves out loss of or damage to the goods themselves (US ITA). Cargo insurance covers that.
Who is involved
- The exporter, the insured seller, buys the policy and sells on credit.
- The foreign buyer owes the invoice. The insurer covers the risk that this buyer does not pay.
- The insurer writes the policy. It can be a private insurer or an export credit agency such as the , or EXIM (US ITA).
- A lender, if the exporter wants one, can finance the insured invoices and receive the claim payments.
02 · How it works
Seven steps take the exporter from choosing cover to a claim payment
Figure 1 · Interactive
Trade credit insurance, step by step
Read down the steps. Step 4 applies only when a lender is involved.
Sources: US International Trade Administration, Trade Finance Guide, July 2022; US EXIM, Single Buyer Insurance; US EXIM, Multi-Buyer Insurance. We put these steps together from these sources. They do not publish one official sequence.
03 · What it means for you
The exporter gets paid most of a covered loss, and the importer still owes the full invoice
Figure 2 · Interactive
What trade credit insurance means for each side
Choose your side of the trade.
04 · Worked example
On a $100,000 unpaid invoice, illustrative cover cuts the exporter's loss to $12,500
This example uses round, made-up numbers. An exporter insures a year's sales of $1,000,000. The premium is 0.25% of insured sales. This rate is made up for the example. One buyer then fails to pay one $100,000 invoice. The policy pays 90%, the level EXIM states for private buyers under its Single Buyer cover. At 95% cover, the exporter's loss would be $7,500. Real premiums vary by buyer, country, terms and policy. This example leaves out deductibles, waiting periods and money recovered later.
Figure 3 · Illustrative
One $100,000 unpaid invoice with 90% cover
Illustrative inputs. The exporter's net loss is highlighted.
Made-up rates, worked out by our checking script. Real premiums and cover levels differ by insurer, buyer, country and policy.
05 · When to use it
Trade credit insurance suits exporters who sell on open account and want protection from buyers who fail to pay
Good fit when
- You sell on open account and want protection if a foreign buyer fails to pay. The US ITA recommends cover with open account terms (US ITA).
- You want a lender to finance more of your foreign invoices. Lenders are more likely to count insured invoices (US EXIM).
- You sell to many buyers. The US ITA says multi-buyer cover generally costs a fraction of one percent of insured sales (US ITA).
Another tool may suit better when
- You need 100% protection on a private buyer. Cover is usually below 100% (US ITA). Look at a confirmed letter of credit, where two banks promise to pay you.
- You want cash now, before the due date. Look at factoring or invoice discounting.
- You sell on terms of two years or more and need financing as well as cover. Look at ECA-backed finance. Medium-term cover runs up to five years (US ITA).
- You worry about the goods being lost or damaged on the way. Cargo insurance covers that risk.
06 · Rules and a real case
The policy sets the rules, and an EXIM case shows a small exporter using cover
The insurance policy is the rulebook. It says which buyers, which events and which share of each loss are covered. The International Trade and Forfaiting Association (ITFA) publishes a standard policy wording for trade credit insurance (ITFA, November 2023). When a government export credit agency supports a sale with repayment over two years or more, the OECD Arrangement on Officially Supported Export Credits also applies (OECD, January 2026 text). The is the industry association for export credit agencies, multilateral institutions and private insurers (Berne Union).
A real case. US EXIM features Inno Concepts Inc., trading as CocoaTown, of Alpharetta, Georgia. The company makes chocolate-making equipment and uses EXIM Export Credit Insurance. EXIM says it exports to more than 100 countries, including Brazil and Canada. It puts about 70% of the company's $1.18 million in sales down to exports. The case study carries no date (US EXIM case study).
The market is large. Berne Union members insured $3,345 billion of short-term trade in 2025. That is about $3.3 trillion. They paid $11,107 million (about $11.1 billion) in claims that year (Berne Union, State of the Industry 2025).
Summary
Trade credit insurance lets the exporter sell on credit with most of the buyer risk covered
The exporter pays a premium. If a foreign buyer fails to pay for a covered commercial or political reason, the insurer pays most of the loss. The exporter keeps a small share, and damage to the goods needs separate cargo cover. The importer still owes the full invoice on the due date.
Related guides: Trade credit insurance; Open account trade; The payment terms spectrum. Related cards: Open account; Factoring; Invoice discounting; ECA-backed finance. Every term is in the Trade Finance Glossary.
Sources
- US International Trade Administration, The Trade Finance Guide: A Quick Reference for US Exporters, July 2022. Supports: definition, covered risks, coverage levels, terms, cost, pricing factors, what is left out, when it fits
- Export-Import Bank of the United States, Export Credit Insurance, undated. Supports: commercial and political cover, lenders counting insured invoices
- Export-Import Bank of the United States, Single Buyer Insurance, undated. Supports: 90% cover for private buyers, assignment of claim payments to a lender
- Export-Import Bank of the United States, Multi-Buyer Insurance, undated. Supports: 95% cover across buyers
- Export-Import Bank of the United States, CocoaTown success story (case study PDF), undated. Supports: the real case
- Berne Union, About the Berne Union, undated. Supports: the industry association and its members
- Berne Union, State of the Industry 2025, data highlights, June 2026. Supports: trade insured and claims paid in 2025
- International Trade and Forfaiting Association, A Summary of ITFA's Key Publications, November 2023. Supports: standard policy wording
- OECD, Arrangement on Officially Supported Export Credits, TAD/PG(2026)1, January 2026. Supports: official support with repayment of two years or more
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