| Commercial Default:
Credit Risk Insurance protects a firm's accounts receivable portfolio against unexpected (and potentially catastrophic) losses resulting from insolvency, protracted default, and devaluation. Typically, private sector insurers provide coverage of between 80% to 90% for commercial defaults, while Exim provides 95% cover to small businesses. The underwriting of credit limits is typically based on:
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Financial information obtained from Credit Agencies such as Veritas and Dun & Bradstreet
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Bank and Trade References for buyer on similar terms/amounts
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Country Risks
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A company's ledger experience with its clients
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A company's loss to sales ratio (three years)
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A company's liquidity, debt structure, covenant triggers
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General economic and political issues
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Terms of deal - amount/tenor
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Company's position within its industry as well as its internal operations
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