New guidelines on trade credit insurance have been implemented by IRDAI

New guidelines on trade credit insurance have been implemented by IRDAI

The Insurance Regulatory and Development Authority of India (IRDAI) on Wednesday issued recommendations to the regulatory framework to promote the sustainable and healthy development of business insurance. Commercial credit insurance protects businesses from the risk of non-payment of goods and services by consumers. They usually compile a consumer portfolio and return the agreed percentage of invoices that remain unpaid due to long-term failure, inability to pay, or expense. It also contributes to the country's economic growth by helping trade and helping to improve economic stability by dealing with trade losses due to payment risks.

IRDAI's proposal stated, "(the guidelines) will also use general insurance companies to provide credit insurance coverage to retailers and licensed banks and other financial institutions to assist businesses in managing global risk, opening up new markets and managing the financial risks associated with an investment portfolio. The personalized insurance credit coverage is provided to improve the business of SMEs and MSMEs, taking into account the ever-changing insurance risk requirements of these sectors. “The policy will consider credit risk that has a direct relationship with the core business, i.e. the delivery of goods or services. If no such direct link exists, the remaining amount cannot be guaranteed under the commercial credit insurance policy. Cover can include but is not limited to commercial risks and political risks.

Political risk protection is only available in the case of consumers outside India and in the case of those countries agreed in the proposal section. On the other hand, the risks of trade will include a debt default or a consumer error, the banks responsible for paying in the event of a letter of credit, and the holding agent in the event of a transaction. It will also be rejected by the buyer after delivery following the terms of the contract with the buyer before shipment, where the goods are made or made only according to the requirements of the buyer and can be sold elsewhere. Any non-receipt of payment due to bank failure will be recovered. "Given the potential impact, the proposed guidelines could have on the many stakeholders involved in trade-related activities, the Executive Council's decision has set out these revised guidelines for seeking their key views and opinions," said IRDAI's framework.