A panel constituted by the insurance regulator IRDAI under leadership of Atul Sahai,CMD, New India Assurance, to overhaul the existing guidelines on Trade Credit Insurance(TCI),has  proposed several changes in the existing guidelines in order to improve the credit insurance market and at the same time meet the requirements of various stakeholders involved in trade related transactions.


TCI (also known as credit insurance, business credit insurance or export credit insurance) is an insurance policy and risk management tool that covers the non-payment risk of buyers resulting from the delivery of goods or services. TCI usually covers a portfolio of buyers and indemnifies an agreed percentage of an invoice/s that remains unpaid as a result of protracted default, insolvency / bankruptcy.


In the Indian context, the present guidelines on TCI, issued in 2016, do not allow the insurance companies to offer full fledge benefits that provides much needed protection to suppliers and restricts TCI covers to banks and financial institutions.


With the Govt. of India’s initiative to improve businesses for the MSMEs, which are considered as the backbone of the national economic structure, it is also imperative to relax the trade credit insurance guidelines to support the business environment.


The insurance companies have to be enabled to offer TCI services with enhanced covers at affordable premiums to boost the MSME sectors. At the same time, it is equally important to make availability of TCI facilities to Banks, FIs, factoring companies, etc who also provide finances & liquidity to them, said the panel.

Some other basic changes suggested by the Sahai panel are:

-The indemnity provided to the policy holders should be allowed to increase from 85% to 90% for all policy holders & 95% in case of political risk for Micro & Small Enterprises.

-Banks, Factoring Companies, FIs & similar entities shall be allowed to avail Credit Insurance to cover trade related transactions which was not permitted earlier.

– Banks, Factoring Companies, FIs & similar entities should not be permitted to cover loan default of Seller.
– No Credit Policy shall cover Reverse Factoring Transactions.
– Single buyer risk covers should be allowed only for Micro & Small enterprises.
– Single Invoices cover shall be availed on Invoice Discounting e-platforms such as TReDS or any similar types of platform
-Creation of a Buyer Default Database with Insurance Information Bureau (IIB) to keep a check on the defaulters & better risk mitigation process
-RBI to recognize Credit Insurance Products as risk mitigation tools for Banks to make it eligible for Capital Relief.

– Every Insurer shall have Board Approved Risk Management Guidelines which should be filed with the Authority while taking approvals for this product category, suggested the panel..
The aggregate net retentions of the insurer for TCI should be be as per the applicable reinsurance regulations & amendments thereof.

The new changes will ensure that the insurance companies will now be able to offer wider range of credit insurance products with enhanced covers at affordable premiums to boost the SME and MSME sectors.


Credit Insurance market in India is dominated by ECGC Limited, a Govt. of India enterprise which provides only export credit insurance facilities to banks and exporters. Domestic credit insurance on the other hand is also being provided by all insurance companies except ECGC.


Around 82 per cent of the total Credit Insurance business is contributed by ECGC Limited, which is outside the purview of the Trade Credit Insurance guidelines. The balance around 18 per cent is contributed by other general insurance companies, both public and private, governed by the Trade Credit Insurance guidelines.


Credit insurance business in India, other than ECGC, has shown a growth rate of around 18 per cent over the last two years. However, the insurance premiums amount to Rs. 277.68 cr during 2018 -19 for insurance companies other than ECGC, which is quite miniscule vis-a-vis the size of Indian economy.