Trade Credit insurers monitor the financial strength of insured customers and may change a buyer credit limit where the assessed risk changes.

A limit can be:

• Increased.
• Reduced.
• Made subject to conditions.
• Withdrawn altogether.

Why might an insurer reduce a credit limit? #

Reasons can include:

• Deteriorating financial performance.
• Increasing late payments.
• Adverse market information.
• Industry problems.
• Significant changes to the buyer’s business.
• Changes in country risk.
• Other credit concerns identified by the insurer.

A reduced limit can be an important warning that the customer’s credit risk has increased.

What happens to existing invoices? #

The treatment of existing exposure depends on the policy terms and when the insured sales occurred.

A reduction or withdrawal does not necessarily affect every invoice in exactly the same way.

The effective date and policy wording need to be checked.

What about new sales? #

Future sales above the revised credit limit may not be insured.

Businesses should therefore review outstanding exposure before continuing to supply on credit.

Possible responses can include:

• Reducing the amount supplied on credit.
• Requesting payment in advance.
• Seeking a deposit.
• Shortening payment terms.
• Requesting security or a guarantee.
• Applying for the credit limit to be reconsidered.

Can Webber Insurance request a review? #

Where additional information is available, Webber Insurance can assist with a request for the insurer to reconsider its decision.

The insurer still determines the credit limit based on its assessment of the buyer.