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Trade Credit and Political Risks

Trade Credit and Political Risks

Account receivables make up more than 40% of current assets as seen on balance sheet. Under corporate management, these account receivables have to be cashed without fail. In overseas countries, however, faced with insolvency or bankruptcy, recoveries are much more difficult than those in Japan due to languages barriers, different business customs, local legal systems or other factors.

Trade Credit Insurance provides comprehensive services beyond the concept of general insurance for the protection of account receivables and the credit management.

Special Characteristics of Trade Credit Insurance:

  • Check the financial conditions of your buyers by the credit assessment in the customer developments.
  • Provide credit information accordingly such as change in their financial conditions, or sign of their business declining by regular credit monitoring
  • Take over your collection activities with lawyers and collection agencies at the time of protracted default.
  • Protect your account receivables and transfers your default risks to the insurer.
  • Indemnify the payment losses and minimize the damages on cash flow/ your fund management.

Trade Credit Insurance protects account receivables and reduces credit risk by outsourcing above-mentioned services. This also minimizes operation risks for the business development in the overseas market.

Willis Services:

  • We, as an international broker, will negotiate with domestic and international credit insurers to establish the sophisticated insurance program.
  • We will provide a professional advice on your company’s current credit management system considering transaction details, sales activities and payment status
  • We will support building credit management system across the countries with Willis’ global network.

Political Risk Insurance

Companies, who are expanding their network to overseas by establishing a local entity or by forming a joint venture with an already established local company, are exposed to the potential risks of loss under political events and their influences in the countries. Political Risk Insurance (PRI) is an insurance product that will prepare you for those political risks outside of Japan.

Definitions of insured;

  • Parent company’s co-signing of subsidiary company’s financial liability to financial institution(s)
  • Direct investment or financial loan to countries overseas.
  • Invested capital from parent company
  • Held stocks

PRI’s Coverage (CEN – Confiscation, Expropriation & Nationalization):

Political Risk Insurance provides 100% coverage for actual losses caused by ‘confiscation’, ‘expropriation’ and ‘nationalization.’

  • Investments that cannot be recovered
  • Sales stocks, account receivables and other current assets
  • Business shutdown
  • Cancellation of business collaboration or contract with a local entity by business interruption.

Other:

Following clauses are available as options upon your requirements;

  • Repatriation of Dividends
  • Business Interruption
  • War Clause
  • Sabotage
  • SRCC – Strikes, Riots & Civil Commotions
  • License Cancellation

Willis In History

Did you know Willis was the broker for the first “project finance” coal fired power project to be constructed in China?