Credit Insurance For Short-Term Trade Receivables

ROLE OF CREDIT/MORTGAGE INSURANCE

Specialized insurance products protect lenders and borrowers, shielding businesses such as exporters from customer defaults and facilitating the financing of mortgages and other transactions. These products include credit insurance for short-term receivables.

CREDIT INSURANCE FOR CUSTOMER DEFAULTS

Credit insurance protects merchants, exporters, manufacturers and other businesses that extend credit to their customers from losses or damages resulting from the nonpayment of debts owed them for goods and services provided in the normal course of business. Credit insurance facilitates financing, enabling insured companies to get better credit terms from banks. The high combined ratio from 2007 to 2010 reflects the crisis in financial markets.

CREDIT INSURANCE, 2003-2012

($000)

Year Net premiums written (1) Annual percent change Combined ratio (2) Annual point change (3)
2003 $640,580 -11.0% 92.3 -9.9 pts.
2004 806,381 25.9 96.9 4.5
2005 936,108 16.1 81.1 -15.8
2006 1,090,145 16.5 86.0 4.9
2007 1,405,444 28.9 129.3 43.4
2008 1,413,313 0.6 171.0 41.6
2009 1,224,474 -13.4 140.8 -30.2
2010 1,344,766 9.8 127.2 -13.6
2011 1,490,135 10.8 94.5 -32.7
2012 1,457,796 -2.2 91.3 -3.2

(1) After reinsurance transactions, excludes state funds.
(2) After dividends to policyholders. A drop in the combined ratio represents an improvement; an increase represents a deterioration.
(3) Calculated from unrounded data.

Source: SNL Financial LC.

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