Export Transactions Credit insurance and the last-mentioned trade insurance are basically the same insurance. However, in Japan, the government (Ministry of Foreign affairs, Ministry of Economy, Trade and Industry) has long conducted trade insurance as a monopoly. Therefore, the private sector was able to enter just a decade ago. It has a different meaning from the government-provided trade insurance and it is called export transaction credit insurance.
The major difference in trade insurance is that comprehensive insurance is the main factor. Depending on the insurance company, it is necessary to apply for insurance from around 10 companies. Of course, it is not possible to pick up only 10 dangerous companies. Otherwise, insurance cannot be established.
10 companies in a segment that is not optional are OK. For example, there are only 10 client company located in Shanghai in the Chemicals Division. In a sense, it can be said that cutting off this segment is the know-how to make good use of insurance.
However, in recent years, to meet the needs of customers, a growing number of private insurers are also taking on insurance individually. In general, the premium is often calculated as a few percent of the sales to these 10 companies.
The biggest advantage compared to trade insurance is the simplicity of the procedures involved in receiving contracts and insurance. Of course, the insurance company also bears the obligation to recover. Also, the time it takes to receive insurance is short.
After understanding the characteristics of these two types of insurance, it is good to use the insurance that matches your own overseas transactions as a means of externalizing risk.
