Welcome to 2025! Tariffs. Reciprocal tariffs. Trade imbalances. Supply chain disruptions and reconfiguration. Global realignment. Uncertainty prevails as the Trump administration unveil economic policies that will impact global trade. Credit is a critical component of economic expansion. However, the extension of credit becomes more conversative when there is less economic stability and visibility into the future. Credit insurance is a vehicle to help facilitate growth without increasing risk. Credit insurance has a number of applications based on the insured and utilization.
What Are the Types of Credit Insurance?
Businesses that extend credit to customers face the risk of non-payment. Credit insurance helps mitigate this risk, ensuring companies maintain financial stability even when clients default. But not all credit insurance is the same—different types cater to various needs. Let’s explore the types of credit insurance and how they protect businesses.
1. Domestic Trade Credit Insurance
Trade credit insurance protects businesses from losses when customers fail to pay for goods or services. It typically covers:
- Protracted default (slow-pay or non-payment by a buyer).
- Buyer insolvency (most commonly Chap 11 or 7).
This type is widely used by manufacturers, wholesalers, distributors and service companies. Learn more from the International Credit Insurance & Surety Association (ICISA).
2. Export Credit Insurance
For companies involved in international trade, export credit insurance provides additional protection against foreign buyers’ non-payment. It is also utilized by financial institutions who are advancing against their borrower’s foreign receivables. The lender is usually the loss payee on the policy. It covers risks
- Buyer non-payment / inability to pay
- Government actions that prevent payment (e.g., trade embargoes).
- Exchange rate fluctuations affecting receivables that result in buyer inability to pay
The U.S. Export-Import Bank (EXIM) offers more insights on export credit insurance.
3. Political Risk Insurance
Businesses operating in emerging markets face unique risks beyond financial instability. While not quite credit, Political risk insurance protects investments against:
- Nationalization or expropriation of assets.
- Political violence disrupting business operations.
- Government-imposed restrictions on funds transfer.
This coverage is valuable for multinational corporations and foreign investors. Explore political risk insurance details from the Multilateral Investment Guarantee Agency (MIGA).
4. Surety Bonds
While not traditional credit insurance, surety bonds act as a financial guarantee ensuring contractual obligations are met. More recently, surety bonds are being accepted in lieu of, or in place of letters of credit. Letters of credit are issued by a bank and generally secured by credit facility reducing availability. Surety bonds are issued by an insurance company and are not collateralized by credit facility thereby providing additional working capital. They are used in:
- Construction projects.
- Government contracts.
- Business licensing requirements.
They protect against non-performance rather than non-payment but serve a similar risk-mitigation role.
5. Non-payment insurance
Non-payment insurance is designed for financial institutions and non-bank lenders rather than businesses. It ensures that outstanding debts, such as revolving credit facilities or term loans, are repaid if the borrower defaults. This type of insurance benefits:
- Commercial lenders
- Private credit / non-bank lenders
- Financial institutions
Choosing the Right Type of Credit Insurance
The right type of credit insurance depends on your business model, customer base, and financial exposure. Here’s a quick comparison:
| Insurance Type | Best For | Key Risks Covered |
| Domestic Trade Credit Insurance | Suppliers & Wholesalers | Non-payment, insolvency |
| Export Credit Insurance | Exporters & Global Traders | Political & economic risks |
| Political Risk Insurance | Multinational Businesses | Government & policy risks |
| Surety Bonds | Contractors & Service Providers | Contractual non-performance |
| Non-payment Insurance | Lenders & Financial Institutions | Borrower default |
Watch: Understanding Trade Credit Insurance
Source: The Coyle Group on YouTube
Final Thoughts
Understanding the types of credit insurance is key to choosing the right protection for your business. Whether securing receivables, mitigating political risks, or ensuring contract performance, credit insurance plays a crucial role in financial security.
Need help selecting the best coverage? Contact us to explore the right solution for your needs.
Since 2004, Securitas Global Risk Solutions, LLC (“Securitas”) has helped clients develop credit and political risk transfer solutions that provide value on numerous levels. As an independent trade credit and political risk insurance brokerage, Securitas is focused on developing comprehensive solutions that meet the needs of clients, ensuring a complete understanding of policy wording and delivering excellent responsive service.
