Accounts Receivable Insurance

Accounts receivable insurance, also called trade credit insurance, protects your business from financial losses when customers fail to pay their invoices. If a buyer becomes insolvent, defaults on payment, or is blocked from paying due to a political event in their country, the policy covers a defined percentage of the outstanding receivable, typically between 75% and 95% of the invoice value.

Why Businesses Buy This Coverage

Your accounts receivable is often the largest uninsured asset on your balance sheet. For most businesses that extend credit to customers, receivables represent 40% or more of total assets. A single large customer default can destroy your cash flow before you have time to respond.

Trade credit insurance also does something most business owners do not expect: it makes your receivables more attractive to banks. Lenders view insured receivables as high-quality collateral, which translates to better borrowing terms, higher credit limits, and lower interest rates. The insurance effectively turns a risky asset into a secured one.

What the Policy Covers

A standard trade credit insurance policy covers three types of non-payment scenarios:

• Insolvency: Your customer files for bankruptcy or enters a formal insolvency process and cannot pay its creditors, including you.
• Prolonged default: Your customer is still operating but simply does not pay within the timeframe specified in the policy, often 90 to 180 days past the invoice due date.
• Political risk: A government action, currency restriction, war, or other political event in the buyer's country prevents payment from reaching you.

Multi-buyer policies are the most common structure. They cover an entire portfolio of customers at a cost that typically runs below 1% of insured sales. That pricing makes trade credit insurance substantially cheaper than invoice factoring, which can cost between 1% and 10% of invoice value.

The Market Is Growing Fast

The global trade credit insurance market was valued at $9.39 billion in 2019 and was projected to approach $18 billion by 2027. North America's share of that market stood at $3.68 billion in 2023 and was projected to reach $7.26 billion by 2031, driven by a surge in U.S. corporate insolvencies. By early 2025, U.S. bankruptcy filings had reached their highest level since 2010, with nearly 800 companies filing in that year alone. Overdue business-to-business invoices in the U.S. hit 43% of total credit sales in 2025.

Those numbers explain why demand for accounts receivable insurance has accelerated sharply. More businesses are extending credit, and more of their customers are struggling to pay.

How a Claim Works

When an invoice becomes overdue beyond the waiting period in your policy, you notify your insurer. The insurer typically begins with collection efforts or renegotiation of payment terms. If the debt remains uncollectable due to insolvency or confirmed default, you file a formal claim. Once approved, you receive reimbursement for the agreed percentage of the loss.

Many policies include a built-in debt collection service. Rather than hiring a collection agency separately, the insurer manages that process on your behalf, which can recover funds without permanently damaging your commercial relationship with the customer.

Major Carriers in the Market

The major carriers offering trade credit insurance include Allianz Trade (formerly Euler Hermes), Coface, Atradius, Zurich, and several others with global operations. These companies maintain large databases of buyer credit information and use that intelligence to set credit limits on individual customers within your policy.

Before approving coverage on a specific buyer, the insurer assesses that buyer's financial health. This continuous monitoring serves a second purpose: it gives you early warning when one of your customers starts showing financial stress, before a payment default actually occurs.

When You Should Consider It

Accounts receivable insurance makes the most financial sense when your business has concentrated credit exposure to a small number of large customers. It also makes sense when you are expanding into new markets, including international markets, where you have less visibility into buyers' financial stability. And it makes sense when your lender specifically requires it as a condition of using receivables as collateral for a line of credit.

For businesses with diversified customer bases and strong internal credit screening, self-insurance through bad debt reserves may be sufficient. The decision depends on the size of your potential loss, the cost of the premium, and how much your receivables concentration affects your overall financial risk.

Sources

• Accounts Receivable Insurance – Global Trends in Political and Credit Risk Insurance: https://www.accountsreceivableinsurance.net/global-trends-political-credit-risk-insurance/
• Accounts Receivable Insurance – Top Regional Markets for Credit Insurance in 2025: https://www.accountsreceivableinsurance.net/top-regional-markets-credit-insurance-2025/
• Accounts Receivable Insurance – How Trade Credit Insurance Improves Creditworthiness: https://www.accountsreceivableinsurance.net/trade-credit-insurance-improves-creditworthiness/
• Accounts Receivable Insurance – Why Construction Firms Need Trade Credit Insurance: https://www.accountsreceivableinsurance.net/why-construction-firms-need-trade-credit-insurance/