Credit insurance includes two main features that act as a shield for the insured companies:
It is important to understand in practice the necessity of credit insurance by reviewing the case of Thomas Cook. In September 2019, the international tourism industry suffered a huge blow with the collapse of the travel giant Thomas Cook. The Group had annual sales of over 9.5 billion and 22 million customers worldwide. The value of their debt in the Greek tourist market when the company declared bankruptcy amounted to 315 million euros, based on a survey of the Institute of Tourism Research and Forecasting (ITEP), conducted on behalf of the Hotel Chamber of Greece. And this is only for hotels, that is, it does not concern the whole tourism industry. A total of 1,193 hotels cooperated with Thomas Cook, which accounted for the 12% of the total hotel capacity in Greece. Of the hundreds of millions lost since its failure, the insured losses were estimated at around 1 million euros, as most companies had not insured themselves against this kind of risk.
In addition to covering the financial loss, the insured companies had a significant benefit: they were informed by their intermediaries about the problem that existed with the company in question, and they proceeded to limit their exposure to this risk.
The case of Thomas Cook highlights the importance of credit insurance and its use as a means of protection for your business.