how does a receivables insurance insurer cover its risk?
Mastery of sophisticated financial analysis and data management techniques is a key success factor in Receivables Insurance, as is global-scale service provision. Multinational trade credit insurers have local teams based throughout the world to evaluate the financial position of buyers worldwide on a daily basis.
The risk is diluted through insurance techniques and risk sharing, by moving a larger or smaller part of the risk to a reinsurer. Insurance techniques are used to mitigate the risk and avoid moral hazard & adverse selection. These include assuring an adequate spread, regionally as well as over sectors, dynamic risk management, agreed maximum liabilities as well as risk sharing agreements and debt collection.