As the COVID-19 pandemic has roiled markets around the world, companies are now seeking out trade credit insurance—a form of coverage that shields a business against the risk of its customers failing to pay for shipments.
"Trade credit policies are very valuable means of transferring [accounts receivable] risk, especially for companies that are transacting business across international borders," said Pillsbury Insurance Recovery & Advisory partner Joseph Jean. "The key to transferring that risk is having the broadest coverage available, on the most simplified terms."
Here, Jean discusses with Law360 how policyholders can maximize their trade credit coverage and avoid potential pitfalls:
"If you do a lot of business in the Middle East, for example, and there is a war exclusion for wars among the countries in the Middle East, that could be a problem. Also, how broad is the exclusion? Does it include many types of strife, or just declared war? If you have concerns, given the countries in which you do business, you are going to want to define that."
The prevalence of hacking and other forms of digital warfare makes it all the more important for policyholders to narrow the scope of war exclusions, Jean added.
"If you provide or use electronic services, and are susceptible to cyber warfare or hacking, then you want to look out for an overbroad war exclusion that could preclude coverage," he said.
Read the full discussion here.