I’ve shipped high-value steel parts to customers before, only to have payments delayed for months—or worse, never received at all. That’s when I realized I needed a backup plan.
Yes, trade credit insurance (TCI) can reduce risk in steel imports by protecting against buyer insolvency 1, political events 2, or payment delays 3. It secures cash flow, improves supplier terms, and enhances trade confidence.
If you’re importing custom steel parts, especially in volatile global markets, you need a way to protect your receivables and maintain stability. That’s exactly where credit insurance becomes essential.
How does trade credit insurance work for importers?
When I sell parts on open account terms, I’m taking a bet that my buyer will pay. With credit insurance, I don’t have to make that bet alone.
Trade credit insurance covers losses if buyers don’t pay on time or at all. Importers pay a premium to an insurer, who reimburses a large portion of unpaid invoices if buyers default, similar to export credit agencies’ coverage 4.
Key Features of TCI
| Feature | Description | Benefit to Importers |
|---|---|---|
| Coverage Percentage | Typically 80%–95% of unpaid invoice value | Limits financial damage |
| Policy Types | Single-buyer, key-buyer, whole-turnover | Flexibility in coverage scope |
| Claims Process | Submit claim after agreed payment delay | Streamlined reimbursement |
| Premium Rates | Based on buyer risk, country, and volume | Adjustable to importer profile |
This gives me the confidence to offer net terms and compete with flexible payment conditions, even when dealing with new or overseas buyers.
What risks are covered by credit insurance policies?
Credit insurance policies cover both commercial risks — like buyer insolvency and slow payments — and political risks, such as tariffs or currency restrictions. 5
Covered Risks Overview
| Risk Type | Examples | Insurance Response |
|---|---|---|
| Commercial Risk | Insolvency, protracted default | Reimbursement up to covered percentage |
| Political Risk | Currency inconvertibility, tariffs, war | Payment protection in blocked transactions |
| Buyer Misconduct | Refusal to pay despite delivery | Covered under default clause |
This multi-layered protection is vital when importing from or selling to regions with regulatory or economic instability.
Is credit insurance common in custom steel imports?
Yes, credit insurance is increasingly common in custom steel imports, especially amid tariff volatility and supply-chain disruptions, as noted in Global Trade Review 6.
Why Steel Buyers Use TCI
| Reason | Impact on Business |
|---|---|
| Tariff Risk | Protects cash flow amid shifting duties |
| Custom Part Value | Safeguards high-investment shipments |
| Delayed Buyer Payments | Maintains liquidity for future orders |
| Supplier Term Extensions | Builds better relationships with coverage |
I’ve noticed that buyers feel more confident buying on open terms when they know we have TCI. It builds trust in long-term trade relationships.
How do buyers apply for trade credit insurance?
To apply for trade credit insurance, buyers submit business and transaction details—including trade volume, buyer profiles, and payment history—to insurers like Coface or Euler Hermes 7. They assess risk and offer tailored policies.
Credit Insurance Application Process
| Step | What You Do | Insurer’s Role |
|---|---|---|
| Submit Application | Share buyer list, invoices, volumes | Analyze buyer credit and country risk |
| Risk Evaluation | Provide past payment behavior | Set credit limits per buyer |
| Select Coverage Type | Choose single or multiple buyers | Tailor policy based on trade structure |
| Pay Premium | Based on volume and buyer ratings | Issue policy and activate coverage |
The real advantage is this: with a policy in place, I can borrow against insured receivables, boosting my working capital without new loans.
Conclusion
Trade credit insurance is an essential tool for steel part importers. It reduces the financial impact of non-payment, supports open account terms, and provides resilience in volatile markets.
Footnotes
-
Explanation of buyer bankruptcy risk and its impact. ↩
-
Insights into political risk insurance for trade. ↩
-
Overview of payment term risks in B2B trade. ↩
-
Export credit agencies’ mechanisms for risk protection. ↩
-
Commercial vs political risk coverage details. ↩
-
Global Trade Review on the rise of credit insurance. ↩
-
Coface/Euler Hermes application processes and coverage options. ↩
