What Is Export Credit Insurance?

Export credit insurance is a safety net that helps protect UK businesses from the financial risks of trading internationally. Whether you’re a small business just starting out or a larger company expanding into new markets, export credit insurance could help you trade more confidently.

What export credit insurance covers

Export credit insurance covers you if your overseas customer doesn’t pay. This might be due to commercial reasons, like insolvency or cash flow problems, or political issues, like unrest, sanctions, or currency restrictions.

Say you’re a UK company selling products or services to a buyer abroad, and you agree to 60-day payment terms. If the customer cannot pay when the time comes – and it’s not your fault – the insurance typically covers between 80% and 95% of the unpaid invoice. So, you’re not left trying to recover the full loss yourself.

The Two Types of Risk it Covers

Export credit insurance is designed to protect your business from two key types of risk that could prevent you from getting paid:

1. Commercial Risk
   This insurance covers issues directly involving your buyer. For example, if your customer becomes insolvent, goes bankrupt, or simply refuses to pay without a valid reason, this insurance steps in to help. It covers situations where your buyer can’t pay due to financial difficulties or won’t pay for no justifiable reason. 

2. Political Risk
   This covers problems that are outside your buyer’s control—often linked to the country they’re based in. These could include war, civil unrest, or government actions such as currency restrictions, import/export bans, or nationalisation. Even if your buyer fully intends to pay, political events in their country might make it impossible for them to do so.

Why Export Credit Insurance is Helpful for Businesses

Export credit insurance can be a real lifeline for businesses involved in international trade, especially when dealing with unfamiliar or higher-risk markets.

• It gives you the confidence to explore new markets

Venturing into new countries or trading with unfamiliar partners can be daunting. With export credit insurance in place, you can approach these opportunities with greater confidence, knowing you’re protected if things don’t go to plan. The safety net is there, whether it’s political instability or a buyer defaulting on payment.

• It helps protect your cash flow

Late or unpaid invoices can quickly disrupt your business’s financial stability. Export credit insurance helps safeguard your cash flow by covering losses from non-payment, meaning you can continue to pay suppliers, staff, and other overheads—even if an overseas customer fails to pay.

• It can improve your chances of securing finance

Lenders are often more comfortable providing loans or trade finance when they know you’ve got protection against payment risks. Having export credit insurance in place shows that you’re managing risk responsibly, which can strengthen your position when negotiating with banks or other financial institutions.

• It brings peace of mind during periods of growth

When your business expands quickly or relies heavily on a few key international customers, the stakes are higher. Export credit insurance guarantees that unforeseen payment issues won’t derail your hard-earned growth.

Is it something every exporter needs?

Not necessarily. You might not need export credit insurance if you’re only trading with trusted clients in well-established markets and have strong payment terms. But it’s worth a look if you’re selling into new regions, offering credit terms to unfamiliar customers, or working on larger contracts.

Smaller businesses may find it useful as they grow their international sales. Even one unpaid invoice can seriously pressure cash flow—and in some cases, it could threaten the business altogether.