Whole turnover credit insurance
The dominant form of trade credit insurance, covering all of a supplier's credit sales to all its customers, with a limit per buyer that the insurer grants, adjusts and can withdraw at any time.
A whole turnover policy covers all of a supplier's credit sales to all its customers, rather than a single receivable. The whole turnover principle protects against adverse selection: the insured cannot choose to insure only its doubtful customers, it must declare all its buyers, which pools risk within its own portfolio. The policy works through limits: the insurer grants for each buyer a maximum amount of covered receivables at the insured's request, and small receivables may be covered under a discretionary limit set by the insured itself according to agreed criteria. The premium is generally expressed as a percentage of insured turnover. In case of non-payment, the insurer indemnifies a percentage of the receivable, often 85 to 95 percent, after a waiting period, then handles collection. The whole turnover policy also provides an information service on buyers' creditworthiness, since the insurer continuously monitors the companies on which it grants limits, and its decision to reduce a limit is often the first warning the supplier receives.
Textbook case: a wholesaler with 50 million euros of credit sales to 800 customers buys a whole turnover policy at 0.2 percent of turnover, or 100,000 euros of premium. When one of its customers defaults on 400,000 euros of covered invoices, it is indemnified at 90 percent, or 360,000 euros.
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