Trade Credit Insurance – Case Study 3

Client 007

Debtor B12

Our client 007 started experiencing problems with Debtor B12 in January last year.  Very reputable debtor however they started having on and off cashflow problems since mid 2017.  Resulting in having to extend payment terms with our client 007.  The first payment extension of 30 days were granted by our client 007  without having to request authorisation from the insurer and fortunately they received payment on the date of the extended terms.  Things started showing improvement for Debtor B12.  Until round about June 2018.  Debtor B12 started requesting payment extensions again.  After the third extension client 007 had no choice but to call in the assistance of their insurer.  The insurer investigated the debtor and found that they were extending payment with a number of freight forwarders and as soon as one freight forwarder would place their account on hold they would jump to another one without paying the previous on.  Just to do the same thing to them.  They would trade with them until the account is blocked and move on to another.  However what debtor B12 did not know was that most of these freight forwarders were insured with the same insurer.  The insurer immediately revoked all cover granted on this debtor and forced them to pay everyone first before they were able to continue with business.