Trade credit insurance, also known as debtor insurance, credit insurance or accounts receivable insurance, protects businesses against financial losses when a buyer fails to pay for goods or services delivered on credit terms. Any Hong Kong business that sells on open credit terms, whether to domestic buyers, mainland China counterparties or international buyers, carries accounts receivable risk. The product is particularly relevant for businesses with significant buyer concentration, businesses trading with buyers in higher-risk markets, and businesses whose bank facilities are linked to the quality of their debtor book.
A bank guarantee is a commitment by a bank to pay if a buyer defaults, usually arranged by the buyer themselves as security for the seller. Trade credit insurance is arranged by the seller to protect their own receivables across a portfolio of buyers. A bank guarantee protects a specific transaction; trade credit insurance protects an entire debtor book or a selected range of buyers. They serve related but distinct purposes and are not interchangeable.
Trade credit insurance premiums in Hong Kong are typically calculated as a percentage of insured turnover, generally in the range of 0.1% to 0.5% of annual insured sales. The exact rate depends on the quality of your buyer portfolio, the markets you sell into, your claims history and the coverage structure selected. A business with well-diversified receivables across established, creditworthy buyers will pay toward the lower end. A business with concentrated exposure to buyers in higher-risk markets will pay more. We provide a full market comparison before you make any commitment.
The Hong Kong Export Credit Insurance Corporation is a government-backed statutory body that has provided export credit insurance to Hong Kong exporters since 1966. It covers both buyer risk and country risk for export sales and is backed by a government guarantee of HK$80 billion. For many SME exporters in Hong Kong, HKECIC is an excellent and cost-effective solution, particularly for sales to higher-risk markets. Private market insurers offer a complementary option with different strengths in terms of policy flexibility, domestic coverage and buyer universe. We advise on both options independently and recommend the right fit for your specific situation.
Yes. While export credit insurance specifically covers international sales, standard trade credit insurance policies can be structured to cover domestic Hong Kong receivables as well. Many Hong Kong businesses hold receivables from both local buyers and overseas buyers within the same debtor book. A well-structured whole-turnover policy can cover the entire book, with the insurer setting credit limits for both domestic and international buyers. Domestic trade credit insurance is particularly relevant for businesses in the construction, wholesale and professional services sectors where payment terms are long and buyer concentrations can be significant.
Yes. Where a business has a specific large contract or a significant concentration with one buyer that represents a meaningful proportion of revenue, a single-buyer or key account policy can be arranged. This structure covers the named buyer only, and the premium reflects the credit quality of that specific counterparty. It is a practical solution for businesses that are otherwise confident in their debtor book but want protection on one outsized exposure.
When a buyer defaults or enters insolvency, you notify your insurer of the potential claim within the timeframes specified in your policy. The insurer then investigates the claim, confirms the loss, and in most cases initiates debt collection action on your behalf before settling the claim. The typical indemnity under a trade credit policy is 85 to 95% of the insured receivable, with the remainder representing the policyholder's retention. We manage the claims notification process on your behalf and ensure the documentation requirements are met correctly from the outset.
