Reply To: Give reasons why insurance is one of the trade finance instrument.

[Anonymous]

Protecting a business from insolvency, bankruptcy, political upheaval or against its user’s inability to pay for services and products is done through trade credit insurance (TCI). It reimburses the firm with cash when customers cannot pay because of unfortunate circumstances. Insurance is, therefore, a must in any significant trade finance scenario. Businesses that have plans to not get into any credit risk must self-insure. However, this will work out expensive, mainly for a small firm operating with a small number of buyers.