The Insurance Regulatory and Development Authority of India on 8th September 2021 has revised the guidelines on Trade Credit insurance which shall be effective from 1st November 2021. The guidelines set out the regulatory framework to promote sustainable and healthy development of trade credit insurance business and to facilitate general insurance companies to offer trade credit insurance covers to suppliers as well as licensed banks and other financial institutions to help businesses manage country risk, open up access to new markets and to manage non-payment risk associated with trade financing portfolio.
These guidelines shall apply to all insurers transacting general insurance business, registered under the Insurance Act, 1938. However, ECGC Ltd (formerly Export Credit Guarantee Corporation of India Ltd) is exempted from the application of these guidelines.
A trade credit insurance for Banks / Financial Institutions and Factoring Companies shall cover the loss on account of non-receipt of payment from a buyer, due to commercial or political risks, against the bills / invoices purchased or discounted and it shall be issued for covering trade related transactions other than loan default of seller.
A trade credit insurance policy shall not cover any receivable arising from transactions made other than trade credit transaction.
Every insurer underwriting trade credit insurance business shall have Board approved Underwriting and Risk Management Policy in addition to or forming part of the underwriting policy prescribed under Guidelines on Product Filing Procedures for General Insurance Products which shall be filed with the Authority.
