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Credit Insurance: Coverage for a Bearish Economy

March 22, 2018

The only times stock market valuations have been higher than we’ve seen them recently were just before the dotcom bubble in the late 1990s and the 1929 Wall Street crash.

Whether you're a bull or bear, acquiring accounts receivable insurance, also known as credit insurance, may be one of the best risk management strategies of the moment.
CCIG’s Jeff Parent.

Does that portend something terrible is about to happen?

A consensus among economists is hard to pin down, but there are indications of a slowdown in the next year or so, Thursday’s rout on Wall Street among them.

What are the other signs?

Well, we know for certain that central banks are gradually tightening their monetary policy, moving to raise interest rates and pulling back from stimulus plans that were put in place after the 2008 financial collapse.

Higher interest rates will cause consumption and business investment to shrink. Will that be enough to reverse economic growth and push us into recession? Possibly.

Elsewhere, we also know that the U.S. is entering a period of trade hostilities with China and any other country that is seen as robbing the U.S. of jobs, technology or trade secrets. Tariffs mean higher prices for goods, so that’s another factor that will cause demand – i.e. economic activity – to dim. But, again, will that be the tipping point? Hard to say.

So where are we in all this? While some of the so-called experts claim a crash is around the corner, there are plenty of analysts who assert the stock markets will continue to push higher over the coming years.

Whichever position you’re inclined to go with, acquiring accounts receivable insurance, also known as credit insurance, may be one of the best risk management strategies of the moment.

Credit insurance provides protection against a customer’s default for a wide range of reasons, including economic downturns.

Few companies carry credit coverage but if we’re truly headed for another recession, the odds of doing business with someone who might go out of business are certainly higher.

This type of coverage also makes sense for any company doing business overseas, because credit insurance can protect you against political events in other countries. That includes trade embargoes and changes in import and export regulations.

Companies that are heavily dependent on revenues from just a few customers also should consider credit insurance.

There’s a deductible in most accounts receivable policies that will be based in part on your customer’s credit histories. These policies also typically include a coinsurance percentage over and above the deductible. Why? Because that’s how the insurer can feel good about the idea that you will continue to keep a close eye on the credit-worthiness of your clients.

These policies also can help reduce your bad-debt reserves and can help you gain greater access to bank financing, sometimes at more favorable rates. In other words, accounts receivable policies not only can protect your bottom line, but help you grow it as well.

That, of course, is always a good thing, whether the economy is growing or not.

Jeff Parent is a CCIG Insurance Adviser. Let him know if you have questions or concerns. Reach him at or 720-330-7918.

CCIG is a Denver-area insurance brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.

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