about credit insurance
and Euler Hermes ACI
Frequently asked questions
about credit insurance
What is credit insurance?
Credit insurance, also called accounts receivable insurance, provides your business with
protection against the failure of your customer to pay its trade debts. This can arise
because your customer becomes insolvent or because your customer fails to pay within
the set timeframe. These risks are usually described as commercial risks. Companies that
export can also protect themselves against a range of political risks that may prevent or
delay payment. This arises when payment is not received as a direct result of a war in the
buyer’s country, cancellation of a contract by the government of the buyer’s country, or
when a government implements regulations which either prevent the export or import of
the goods – or prevent or restrict the transfer of hard currency – from the buyer’s country.
Is credit insurance new? Are there any sales minimums?
No. Euler Hermes ACI, founded in 1893, From a practical standpoint, you generally
is the oldest and largest underwriter of need annual sales of at least $1,000,000
business credit insurance in North America. to make the program cost-effective.
The demand for credit insurance has grown
Who uses credit insurance?
substantially in the past several years.
Euler Hermes ACI insures over $100 billion Any business selling on open account terms
of business-to-business transactions. to other businesses can benefit from credit
insurance. Euler Hermes ACI’s customers
What credit terms can be protected? range in size from small businesses to large,
Business credit insurance is for short-term multi-national companies. Firms in most
trade accounts receivable, those due in less sectors of the economy – including business
than one year. services as well as those trading in goods –
use credit insurance.
$2,000,000 to make up for the lost profits. More
Why should I consider credit insurance?
importantly, the lost cash flow could be devastating.
On average, 40% of a company’s assets are in the
Non-payment weakens your company and lowers its
form of trade debts. Sometimes the figure is far
investment capacity. A credit insurance policy helps
higher. It is very difficult for a company to predict
in the management of your accounts receivable and
which client will default on payment. Close to 50
compensates you in the event of non-payment.
percent of all payment defaults arise from vendors
with whom stable and long-term trade relationships
Can I cover just the accounts I am
have been established. The cost to a business of
non-payment can be considerable. For example, if
No insurance program can work over the long-term
a company’s profit margin is 5 percent and one of
if only questionable buyers are covered. But more
its customer defaults on a debt of $100,000, the
specifically, no one can accurately predict when a
company will have to produce additional sales of
company may fail. Euler Hermes ACI underwrites on a
whole turnover basis. This provides the biggest value
to its clients and supports a long-term relationship.
What are the benefits of credit insurance?
There are many benefits including:
• Better credit control and protection against catastrophic
• Better risk management through an “early warning
system” bolstered by the Euler Hermes database;
A credit insurance • Better business planning through the elimination of
• Improved working capital from your lender because you
policy gives you have enhanced the quality of your accounts receivable
with credit insurance;
peace of mind • The benefit of Euler Hermes ACI’s debt collection
capabilities and network; and
and complete • Improved cash flow, because you receive payment for
unpaid accounts receivable that are insured.
confidence to grow How much does credit insurance cost?
For the most popular policy, the premium is calculated on a
your business. percentage of your sales. This rate is generally less than 1%,
depending on the trading history and historical debt loss of
your company, your trade sector and your customer base.
When political risk coverage is included, the premium may
be higher. Given that the average level of bad debt experienced
by companies is approximately 0.7% of sales, the majority of
businesses will find credit insurance to be highly cost-effective,
even before taking into account the many additional benefits in
the areas of sales development, risk and credit management
and bank financing.
What is the level of indemnity? Are any services available on-line?
The level of indemnity typically ranges from 80%-100%; Yes. With EOLIS, Euler Hermes ACI’s on-line policy
however, the level varies depending on the policy management system, you can make credit requests,
you select, your credit management experience, your file a claim, and monitor your claims any time you
accounts receivable portfolio, and your premium target. want via the Internet.
What if my company hasn’t experienced Can you recover unpaid bills on my
credit losses? company’s behalf?
Protection from bad-debt losses is just one of the Yes. Euler Hermes ACI offers a debt collection service
benefits of credit insurance. When your receivables to its customers.
are insured, you can also:
Why choose Euler Hermes ACI?
• Safely expand sales
Euler Hermes ACI’s experience is unsurpassed
• Secure better borrowing terms with lenders
in North America. For more than 100 years,
• Reduce bad-debt reserves
Euler Hermes ACI has protected companies in nearly
• More confidently achieve financial objectives
every industry against unexpected bad-debt losses.
As North America’s largest credit insurer, and as a
If I incur a loss, how soon will a claim
member of Euler Hermes, the world’s premier credit
insurer, the Euler Hermes Group has unparalleled
Generally, the claim will be paid within 60 days on
access to proprietary information and global risk
a domestic loss. Export losses may take a bit longer
because of country waiting periods. However, if the
export loss is an insolvency, it will be paid within
60 days of the date of loss.
Is it hard to apply for business credit insurance?
No. Simply complete an application and forward it along with a recent aging of your accounts receivable to
your Euler Hermes ACI agent or insurance broker for a detailed quote. Or, visit the Euler Hermes ACI web site at
www.eulerhermes.com/aci to get a free, no-obligation quote. To schedule a meeting with a Euler Hermes ACI
representative, please call 877-909-3224.
North American Offices
Eastern US Central US Canada
Baltimore, MD Chicago, IL Montreal, PQ
Los Angeles, CA
877-909-3224 877-904-3224 877-509-3224
New York, NY Atlanta, GA Toronto, ON
877-884-3224 800-527-0346 877-511-3224
Euler Hermes ACI
800 Red Brook Boulevard
Owings Mills, MD 21117