Export Credit Insurance: How to Protect Your Receivables

Export credit insurance explained: commercial and political risks covered, credit limits, premiums, claims, exclusions, and when Algerian exporters must use it.

Every exporter who sells on credit is, in effect, lending money to its buyers. A single large customer going bankrupt, or a country suddenly unable to release foreign currency, can wipe out a year of profit. Export credit insurance exists to make that loss bearable: for a premium, an insurer takes on most of the risk that your foreign buyers do not pay.

It is the tool that makes open account sales safe enough to offer, and it often opens the door to financing, because banks lend more readily against insured receivables. It is also, in some countries, a regulatory requirement: Algerian exporters, for example, must now insure longer payment terms before granting them.

This lesson explains which risks credit insurance covers and which it does not, how credit limits and indemnities work, what a policy obliges you to do, what it costs, and how to claim. A worked example shows what happens, in figures, when an insured buyer fails.

What is export credit insurance?

Export credit insurance is a policy under which an insurer indemnifies an exporter for a percentage of its loss when a foreign buyer does not pay for goods or services delivered on credit, for covered reasons.

Two kinds of providers coexist:

• Export credit agencies (ECAs): public bodies or companies acting for the state, created to support national exports. They often cover political risks, difficult markets and longer terms the private market will not take. In Algeria, the national body is CAGEX, the Compagnie Algérienne d'Assurance et de Garantie des Exportations.
• Private credit insurers: they insure portfolios of short-term receivables, mainly commercial risks plus some political risks, in most countries of the world.

Many of these institutions, public and private, belong to the Berne Union, the international association of export credit and investment insurers.

Which risks are covered?

What is not covered

• Disputes: if the buyer contests the debt, for example over quality, the insurer pays only once the dispute is resolved in your favour.
• Your own breach: late delivery, wrong goods, missing documents, or shipping in breach of the law.
• Sales above the credit limit or after a limit was reduced or cancelled.
• Currency losses: a falling exchange rate is not a credit loss. See managing currency risk.
• The uninsured percentage: the share of each loss you keep, typically 5 to 15%.

How does a credit insurance policy work?

1. Underwriting: the insurer studies your business, your buyers, your markets and your payment history, and proposes a policy: percentage of cover, maximum credit period, premium basis.
2. Credit limits: for each buyer, you request a limit, the maximum amount the insurer will cover outstanding at any time. The insurer grants, reduces or refuses it. Small buyers may fall under a discretionary limit you set yourself within rules.
3. Shipping within limits: you ship and invoice within the limit and the maximum credit period allowed.
4. Declarations: you declare your insured turnover monthly or quarterly, on which the premium is calculated.
5. Monitoring: the insurer watches your buyers and may reduce or cancel a limit for future shipments if a buyer's situation deteriorates.
6. Overdue notification: if an invoice is unpaid a set number of days after its due date, you must notify the insurer within the policy's deadline.
7. Claim: you file a claim with the evidence of the debt: contract, invoices, transport documents, correspondence.
8. Indemnity: the insurer pays the insured percentage, on proof of insolvency or after the waiting period for protracted default, and then pursues recovery; recoveries are shared in proportion to each side's share of the loss.

Types of policy

• Whole turnover: covers all your credit sales, or all those to a given region, at the lowest rate per unit of turnover. The usual choice for exporters with many buyers.
• Single buyer: covers one key customer, useful when one buyer is a large share of your sales.
• Single transaction: covers one contract, often a large or longer-term one, typically from an ECA.
• Top-up and excess-of-loss: extra cover above the main policy's limits, or cover only above a large deductible, for larger companies.

What does it cost?

The premium depends on your buyers' credit quality, the countries, the payment terms, the volume and your claims history. For a whole turnover policy on short-term sales it is commonly a fraction of a percent of insured turnover, with a minimum annual premium. Some insurers also charge for credit assessments on each new buyer. Longer terms and riskier countries cost more. Compare the premium with what it replaces: the cost of letters of credit you no longer need, and the sales you can make on credit terms that competitors offer.

Worked example: PVC pipes to West Africa

An Algerian producer of PVC pipes sells on 90-day open account to distributors in Abidjan, Dakar and Nouakchott, for an annual turnover of EUR 1,200,000. It takes a whole turnover policy: 90% cover for commercial and political risks, premium 0.45% of insured turnover, so EUR 5,400 a year.

The insurer grants a EUR 50,000 limit on the Dakar distributor. Under sales pressure, the exporter lets the outstanding reach EUR 60,000. The distributor then enters insolvency proceedings.

• Insured debt: limited to the credit limit, EUR 50,000.
• Indemnity: 90% of EUR 50,000 = EUR 45,000.
• Exporter's own loss: EUR 15,000, made of EUR 10,000 above the limit and EUR 5,000 uninsured share.

Without insurance, the loss would have been EUR 60,000, more than ten years of premium. With the outstanding kept inside the limit, it would have been EUR 5,000.

When is credit insurance required?

Usually, it is a choice. Sometimes it is a condition: banks or factors may require it before financing receivables, and some exchange-control regimes impose it. Under Banque d'Algérie Regulation No. 26-02 of 23 July 2026, an Algerian exporter who grants a non-resident buyer payment terms of more than 120 days, within the maximum of 180 days, must first back the operation with export credit insurance taken out with the national authorised insurer; export proceeds must otherwise be repatriated within 120 days of shipment. CAGEX has said it continues to offer cover for shorter terms too. Check the current conditions with your bank and the insurer before quoting long terms. See repatriation of export proceeds.

Credit insurance or another protection?

Credit insurance is not the only way to secure a receivable. Each alternative shifts a different risk, at a different cost and to a different party.

In practice, credit insurance suits a portfolio of open account buyers, letters of credit suit large or one-off deals in difficult markets, and guarantees suit a few large buyers who accept to provide them. Many exporters combine them: a whole turnover policy for most buyers, and a confirmed letter of credit for the one market the insurer will not cover. See international payment methods compared.

Common mistakes

• Shipping above the credit limit "because the buyer always pays".
• Missing the overdue notification deadline.
• Insuring only bad buyers: insurers price a whole-turnover policy on the spread of good and bad risks, and selective cover costs more.
• Believing a disputed invoice will be paid by the insurer: settle quality claims fast and document everything.
• Forgetting that the policy covers credit risk, not currency risk or your own failure to perform.
• Not telling your bank about the policy, when it could lower your financing cost.