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    Introducing Easy-to-Understand Terms in Credit Insurance
    관리자
    2024-12-26

    1. Credit Risk (신용위험)
    Refers to the possibility that a counterparty (debtor) may fail to meet its obligations due to factors like deteriorating financial health,

    bankruptcy, or insolvency. Credit insurance helps companies mitigate potential losses arising from these credit risks.


    2. Policyholder (보험 계약자)
    The business or individual who enters into a credit insurance contract and pays the premium.

    Policyholders reduce their potential losses according to the coverage provided by the insurer.


    3. Insured (피보험자)
    The party that receives coverage under the policy. In credit insurance, this is typically the company extending trade credit (i.e., selling goods or services on account).

     

    4. Insurance Proceeds (보험금)
    The amount paid by the insurance company when a covered credit risk event occurs and is recognized as an insured loss.

    These proceeds compensate for some or all of the unpaid receivables to mitigate the insured’s financial loss.

     

    5. Deductible (면책금액)
    The amount the insured must bear before insurance proceeds are paid out.

    Often set as a certain percentage, it represents risk-sharing between the insurer and the insured.

     

    6. Policy Limit (보험한도)
    The maximum amount the insurer will pay under a credit insurance policy.

    It can be set per transaction, per debtor, or for the policy as a whole.

     

    7. Coverage Scope (보장범위)
    The range of credit risks covered by a credit insurance policy.

    Most credit insurance covers defaults, bankruptcies, and delayed payments by specific counterparties;

    it may also protect against losses arising from political or country-specific risks.

     

    8. Credit Assessment (신용 평가)
    The process by which an insurance company evaluates the likelihood of default by the policyholder’s counterparties.

    This assessment influences the scope of coverage and the premium charged.

     

    9. Premium (보험료)
    The amount the policyholder pays to maintain the credit insurance policy.

    Premium rates vary depending on coverage limits,

    counterparties’ credit ratings, policy duration, and other factors.

     

    10. Policy Term (보험기간)
    The period during which the insurance policy is valid. Credit insurance policies often run on a yearly basis, with the option to renew.

     

    11. Notification of Claim (사고 발생 통지)
    The process of informing the insurer when a credit risk materializes, prompting a possible compensation claim.

    This notice must typically be given within a specified timeframe; failure to do so may limit or void coverage.

     

    12. Claim for Compensation (보상금 지급 청구)
    The procedure the insured follows to request payment from the insurer after a covered loss occurs.

    Following proper notification and submission of required documents, the insurer processes and pays the claim.

    What Exactly Is Credit Risk?
    소유자
    2024-12-26

    A company’s credit risk refers to the possibility that it will be unable to meet its debt obligations.

    This risk includes failing to pay back borrowed funds or interest on time, as well as any situation

    where the company does not fulfill its payment commitments.

    Credit risk is considered a critical issue for financial institutions, investors, and creditors alike.


    Financial Health

    A company with a weakening financial position may struggle to repay debts. As its fiscal stability declines, credit risk increases.


    Profitability 

    Reduced operating or net income can lead to insufficient cash flow to cover debt obligations, negatively impacting the company’s credit rating.


    Management Capability

    Poor managerial decisions or failed investments can heighten the likelihood of default.


    External Environment

    Factors such as economic recessions, rising interest rates, or increases in raw material costs can erode profitability and elevate credit risk.


    Industry Risks

    Certain industries are more prone to cyclical economic fluctuations, making companies in those sectors inherently more vulnerable to credit risk.
     

    How Can Companies Address Credit Risk?
    소유자
    2024-12-26

    1. Avoidance
    A strategy aimed at eliminating the risk altogether.

    For instance, a company might decide not to offer any credit sales, thereby completely avoiding the risk of non-payment.

    By imposing strict transaction conditions, the company blocks potential losses at the source.


    2. Retention
    A strategy where the company acknowledges and accepts the risk.

    For example, a business might proceed with credit sales without any protective measures, essentially leaving outcomes to chance.

    While they are aware of the risk, they choose to bear any resulting consequences.


    3. Reduction
    A strategy designed to lessen risk through various safeguards.

    Examples include requiring collateral or obtaining guarantees, thus reducing the potential losses from credit sales.


    4. Transfer
    A strategy of shifting risk to a third party.

    Credit insurance or surety insurance are prime examples: companies transfer the potential losses from credit transactions to the insurer.

    This is a widely adopted approach that businesses use to manage and reduce credit risk.


     

    Why Is Credit Management Necessary for Companies?
    소유자
    2024-12-26

    Effective credit management not only reduces the risk of uncollected receivables

    but also plays a vital role in maintaining a healthy cash flow, preserving financial stability,

    and expanding growth opportunities. Through systematic credit management,

    a company can bolster its preparedness for unexpected risks, sustain a stable operating

    environment, and build long-term competitiveness.


    Key reasons credit management is essential for businesses include:


    •    Ensuring stability of cash flow
    •    Reducing the risk of debtor default
    •    Managing funds efficiently and lowering capital costs
    •    Preserving financial health and credit ratings
    •    Enabling business growth and new deal opportunities
    •    Identifying and responding to financial risks in a timely manner

    What Do Clients Typically Seek from Credit Insurance in Business Settings?
    소유자
    2024-12-26

    Over the years, clients have shared the following common needs regarding credit insurance:


    •    Proactive strategies to handle the risk of default among credit customers
    •    Greater sales opportunities once adequate safety measures are in place for existing customers
    •    Ability to secure reputable clients without requiring collateral
    •    Cost reduction and revenue growth at the same time
    •    Significant increase in exports without incurring excessive risk
    •    Expansion of sales through overseas subsidiaries to meet urgent needs, yet concerns about risk remain
    •    Instant assessment of business partners’ credit status and credit limits
    •    Protection and improvement of financial statements via accounts receivable credit insurance
    •    Reduced funding costs and interest rates
    •    Efficient staff management to cut personnel costs
    •    Availability of a specialized risk management team without forming an in-house unit
    •    Factoring services for exports
    •    Additional financing options beyond the Korea Trade Insurance Corporation for export transactions

    What Is Credit Insurance?
    소유자
    2024-12-26

    Credit insurance is an insurance product designed to protect sellers against losses that may occur

    when their buyers (debtors) default on payments for goods or services sold on credit.

    It is typically used to mitigate the risk of non-payment when a company sells goods or services on account.

    By doing so, businesses can reduce the credit risk associated with their receivables.

    History of Credit Insurance and Its Introduction to Korea
    소유자
    2024-12-26

    Credit insurance first emerged in Europe in the late 19th century as a means to reduce the risk

    of payment defaults in business transactions. As export activities gained momentum in countries

    such as Germany, France, and the UK, credit risk became a pressing concern.

    Credit insurance evolved in response to these risks, and with increasing globalization and

    expanded trade, it has taken on an increasingly significant role in global finance.
     

    In Korea, the introduction of credit insurance was motivated by the need to support economic growth

    and the expansion of international trade. Throughout the 1970s and 1980s, as Korea’s

    economy grew rapidly and shifted toward export-led industries, overseas receivables risk began to rise.
     

    1992: Establishment of the Korea Trade Insurance Corporation
    The government founded the Korea Trade Insurance Corporation (K-SURE) in 1992, providing export

    companies with protection from the credit risks of international buyers.
     

    Introduction of Accounts Receivable Insurance by KODIT and SGI
    Subsequently, to protect small and medium-sized enterprises (SMEs) in the domestic market,

    the Korea Credit Guarantee Fund (KODIT) introduced an accounts receivable insurance

    program to help SMEs mitigate domestic receivables risk.

    SGI Seoul Guarantee now also provides credit insurance solutions to businesses looking

    to hedge credit risks associated with their receivables.

    How Does Traditional Collateral Differ From Credit Insurance?
    소유자
    2024-12-26

    Traditional Collateral Approach
    A lender offering a loan typically requires the borrower to provide assets as collateral.

    Should the borrower fail to meet their debt obligations, the lender can sell the collateral to recover losses.

    While this reduces risk for the lender, it poses challenges for SMEs or startups that lack sufficient collateral.

    Additionally, disposing of collateral can be time-consuming and costly.


    Credit Insurance Approach
    Credit insurance protects the receivables that arise from specific transactions, without requiring collateral.

    If a buyer does not pay, the insurance company will compensate the insured business

    (according to the policy terms), covering part or all of the unpaid receivables.

    As this insurance focuses on the creditworthiness of the buyer, companies can confidently grow

    their customer base—especially if their customers have good credit ratings—even if the company

    itself has limited collateral.
     

    What are the differences Between KODIT’s TCI and SGI’s TCI?
    소유자
    2024-12-26

    Operating Entity
    •    KODIT’s Accounts Receivable Insurance: Operated by a public institution (Korea Credit Guarantee Fund).
    •    SGI’s Accounts Receivable Credit Insurance: Operated by a private surety/insurance firm (SGI Seoul Guarantee).


     Eligible Companies
    •    KODIT: Primarily SMEs.
    •    SGI: SMEs as well as mid-sized and large companies.


     Scope of Coverage
    •    KODIT: Mainly domestic receivables.
    •    SGI: Can cover both domestic and international receivables.


    Cost & Flexibility
    •    SGI: Premiums can be higher but the policies tend to offer greater flexibility.
    •    KODIT: Often lower premiums due to policy-driven support. 

    Advantages of Credit Insurance as a Risk-Transfer Strategy
    소유자
    2024-12-26

    •    Risk Diversification: Unpredictable losses are transferred to another entity, bolstering a company’s financial stability.


    •    Operational Efficiency: Reduces the burden of risk management, allowing businesses to focus on core operations.


    •    Sales Growth Opportunities: With reduced concern over non-payment, companies can pursue more aggressive business strategies.


    •    Sustainable Growth: Protects a firm against unforeseeable default risks, establishing a solid foundation for long-term development.

    글쓰기

    NCRM 회사소개
    관리자012024-12-26

    글쓰기

    How Are Premiums Calculated?
    소유자
    2024-12-26

    Premiums are generally determined by multiplying the sum of expected sales amounts (to be insured)

    for each buyer by the applicable premium rate (ranging from approximately 0.071% to 0.804%).

    Note: If you already hold collateral, you only pay premiums on the portion of your sales that exceeds

    that collateral limit, according to the “Special Terms and Conditions for Collateralized Credit Limits.”
     

    How Are Credit Limits Assigned to Buyers?
    소유자
    2024-12-26

    For each buyer with whom the policyholder transacts, the policyholder submits a request

    specifying the needed credit limit (collateral amount).

    SGI Seoul Guarantee then underwrites and confirms credit limits based on the requested amount,

    notifying the policyholder of each buyer’s approved credit limit.


    Note: You can apply to modify credit limits during the policy term, but any modification is subject to review and approval.
     

    How Is an Insurance Claim Processed?
    소유자
    2024-12-26

    If any buyer fails to pay for goods or services purchased on credit by the due date,

    the policyholder (the insured company) can receive compensation for the resulting loss.

    Each buyer’s claim is compensated up to the pre-approved credit limit for that buyer.
     

    How long does it take to receive the insurance payment, and what is the total claimable amount?
    소유자
    2024-12-26

    Your total claimable amount is specified in your insurance policy. It is generally up to 30 times the

    confirmed premium, but this may be adjusted during the policy issuance process.


    Once a claim is filed, the insurance payment is typically processed within about one month.

    However, the timeline may vary depending on specific circumstances.
     

    How Long Does It Take to Arrange Coverage?
    소유자
    2024-12-26

    The time frame varies, depending on the policyholder’s internal processes and the negotiation period.

    It can range from a few weeks to several months after submitting an inquiry form.

    If you communicate in advance about any items requiring review—such as the credit limit, the overall

    compensation limit, or additional product features—it may shorten the process.


    Note: In some cases, it can take as little as 3–4 weeks.

    What Are the Advantages Compared to Other Receivables Policies?
    소유자
    2024-12-26

    Unlike maintaining bank deposits or real estate collateral, insurance requires less upkeep and tends to have a simpler claims process.

    Because coverage applies to all buyers, a policyholder can greatly reduce the time, effort, and administrative expenses associated with

    credit management and collection for each account.
     

    Can I Cover Only Buyers with Lower Credit Ratings and Exclude Those with Higher Ratings?
    소유자
    2024-12-26

    No. Only covering buyers that already have poor credit ratings would introduce adverse selection, making the insurance unviable.

    Unfortunately, no such product exists in the market today.
     

    Are There Minimum Criteria to Qualify for an Insurance Policy?
    소유자
    2024-12-26

    Insurance companies typically require that your annual sales be at least KRW 10 billion

    (approximately USD 8 million) before offering a policy.
     

    Which Companies Benefit Most from Credit Insurance?
    소유자
    2024-12-26

    Any business—small, medium, or large—that conducts credit (i.e., invoiced) transactions of

    at least KRW 10 billion in annual revenue can benefit. Export-driven companies or overseas subsidiaries may also find it advantageous.
     

    What Is the Main Difference Between Traditional Collateral and Credit Insurance?
    소유자
    2024-12-26

    Collateral Approach:
    The seller (creditor) demands collateral from the buyer, ensuring repayment.


    Credit Insurance Approach:
    The selling company (creditor) purchases an insurance policy without requiring the buyer’s consent or collateral,

    thus protecting its accounts receivable.
     

    Write

    Introducing Easy-to-Understand Terms in Credit Insurance
    관리자
    2024-12-26

    1. Credit Risk (신용위험)
    Refers to the possibility that a counterparty (debtor) may fail to meet its obligations due to factors like deteriorating financial health,

    bankruptcy, or insolvency. Credit insurance helps companies mitigate potential losses arising from these credit risks.


    2. Policyholder (보험 계약자)
    The business or individual who enters into a credit insurance contract and pays the premium.

    Policyholders reduce their potential losses according to the coverage provided by the insurer.


    3. Insured (피보험자)
    The party that receives coverage under the policy. In credit insurance, this is typically the company extending trade credit (i.e., selling goods or services on account).

     

    4. Insurance Proceeds (보험금)
    The amount paid by the insurance company when a covered credit risk event occurs and is recognized as an insured loss.

    These proceeds compensate for some or all of the unpaid receivables to mitigate the insured’s financial loss.

     

    5. Deductible (면책금액)
    The amount the insured must bear before insurance proceeds are paid out.

    Often set as a certain percentage, it represents risk-sharing between the insurer and the insured.

     

    6. Policy Limit (보험한도)
    The maximum amount the insurer will pay under a credit insurance policy.

    It can be set per transaction, per debtor, or for the policy as a whole.

     

    7. Coverage Scope (보장범위)
    The range of credit risks covered by a credit insurance policy.

    Most credit insurance covers defaults, bankruptcies, and delayed payments by specific counterparties;

    it may also protect against losses arising from political or country-specific risks.

     

    8. Credit Assessment (신용 평가)
    The process by which an insurance company evaluates the likelihood of default by the policyholder’s counterparties.

    This assessment influences the scope of coverage and the premium charged.

     

    9. Premium (보험료)
    The amount the policyholder pays to maintain the credit insurance policy.

    Premium rates vary depending on coverage limits,

    counterparties’ credit ratings, policy duration, and other factors.

     

    10. Policy Term (보험기간)
    The period during which the insurance policy is valid. Credit insurance policies often run on a yearly basis, with the option to renew.

     

    11. Notification of Claim (사고 발생 통지)
    The process of informing the insurer when a credit risk materializes, prompting a possible compensation claim.

    This notice must typically be given within a specified timeframe; failure to do so may limit or void coverage.

     

    12. Claim for Compensation (보상금 지급 청구)
    The procedure the insured follows to request payment from the insurer after a covered loss occurs.

    Following proper notification and submission of required documents, the insurer processes and pays the claim.

    What Exactly Is Credit Risk?
    소유자
    2024-12-26

    A company’s credit risk refers to the possibility that it will be unable to meet its debt obligations.

    This risk includes failing to pay back borrowed funds or interest on time, as well as any situation

    where the company does not fulfill its payment commitments.

    Credit risk is considered a critical issue for financial institutions, investors, and creditors alike.


    Financial Health

    A company with a weakening financial position may struggle to repay debts. As its fiscal stability declines, credit risk increases.


    Profitability 

    Reduced operating or net income can lead to insufficient cash flow to cover debt obligations, negatively impacting the company’s credit rating.


    Management Capability

    Poor managerial decisions or failed investments can heighten the likelihood of default.


    External Environment

    Factors such as economic recessions, rising interest rates, or increases in raw material costs can erode profitability and elevate credit risk.


    Industry Risks

    Certain industries are more prone to cyclical economic fluctuations, making companies in those sectors inherently more vulnerable to credit risk.
     

    How Can Companies Address Credit Risk?
    소유자
    2024-12-26

    1. Avoidance
    A strategy aimed at eliminating the risk altogether.

    For instance, a company might decide not to offer any credit sales, thereby completely avoiding the risk of non-payment.

    By imposing strict transaction conditions, the company blocks potential losses at the source.


    2. Retention
    A strategy where the company acknowledges and accepts the risk.

    For example, a business might proceed with credit sales without any protective measures, essentially leaving outcomes to chance.

    While they are aware of the risk, they choose to bear any resulting consequences.


    3. Reduction
    A strategy designed to lessen risk through various safeguards.

    Examples include requiring collateral or obtaining guarantees, thus reducing the potential losses from credit sales.


    4. Transfer
    A strategy of shifting risk to a third party.

    Credit insurance or surety insurance are prime examples: companies transfer the potential losses from credit transactions to the insurer.

    This is a widely adopted approach that businesses use to manage and reduce credit risk.


     

    Why Is Credit Management Necessary for Companies?
    소유자
    2024-12-26

    Effective credit management not only reduces the risk of uncollected receivables

    but also plays a vital role in maintaining a healthy cash flow, preserving financial stability,

    and expanding growth opportunities. Through systematic credit management,

    a company can bolster its preparedness for unexpected risks, sustain a stable operating

    environment, and build long-term competitiveness.


    Key reasons credit management is essential for businesses include:


    •    Ensuring stability of cash flow
    •    Reducing the risk of debtor default
    •    Managing funds efficiently and lowering capital costs
    •    Preserving financial health and credit ratings
    •    Enabling business growth and new deal opportunities
    •    Identifying and responding to financial risks in a timely manner

    What Do Clients Typically Seek from Credit Insurance in Business Settings?
    소유자
    2024-12-26

    Over the years, clients have shared the following common needs regarding credit insurance:


    •    Proactive strategies to handle the risk of default among credit customers
    •    Greater sales opportunities once adequate safety measures are in place for existing customers
    •    Ability to secure reputable clients without requiring collateral
    •    Cost reduction and revenue growth at the same time
    •    Significant increase in exports without incurring excessive risk
    •    Expansion of sales through overseas subsidiaries to meet urgent needs, yet concerns about risk remain
    •    Instant assessment of business partners’ credit status and credit limits
    •    Protection and improvement of financial statements via accounts receivable credit insurance
    •    Reduced funding costs and interest rates
    •    Efficient staff management to cut personnel costs
    •    Availability of a specialized risk management team without forming an in-house unit
    •    Factoring services for exports
    •    Additional financing options beyond the Korea Trade Insurance Corporation for export transactions

    What Is Credit Insurance?
    소유자
    2024-12-26

    Credit insurance is an insurance product designed to protect sellers against losses that may occur

    when their buyers (debtors) default on payments for goods or services sold on credit.

    It is typically used to mitigate the risk of non-payment when a company sells goods or services on account.

    By doing so, businesses can reduce the credit risk associated with their receivables.

    History of Credit Insurance and Its Introduction to Korea
    소유자
    2024-12-26

    Credit insurance first emerged in Europe in the late 19th century as a means to reduce the risk

    of payment defaults in business transactions. As export activities gained momentum in countries

    such as Germany, France, and the UK, credit risk became a pressing concern.

    Credit insurance evolved in response to these risks, and with increasing globalization and

    expanded trade, it has taken on an increasingly significant role in global finance.
     

    In Korea, the introduction of credit insurance was motivated by the need to support economic growth

    and the expansion of international trade. Throughout the 1970s and 1980s, as Korea’s

    economy grew rapidly and shifted toward export-led industries, overseas receivables risk began to rise.
     

    1992: Establishment of the Korea Trade Insurance Corporation
    The government founded the Korea Trade Insurance Corporation (K-SURE) in 1992, providing export

    companies with protection from the credit risks of international buyers.
     

    Introduction of Accounts Receivable Insurance by KODIT and SGI
    Subsequently, to protect small and medium-sized enterprises (SMEs) in the domestic market,

    the Korea Credit Guarantee Fund (KODIT) introduced an accounts receivable insurance

    program to help SMEs mitigate domestic receivables risk.

    SGI Seoul Guarantee now also provides credit insurance solutions to businesses looking

    to hedge credit risks associated with their receivables.

    How Does Traditional Collateral Differ From Credit Insurance?
    소유자
    2024-12-26

    Traditional Collateral Approach
    A lender offering a loan typically requires the borrower to provide assets as collateral.

    Should the borrower fail to meet their debt obligations, the lender can sell the collateral to recover losses.

    While this reduces risk for the lender, it poses challenges for SMEs or startups that lack sufficient collateral.

    Additionally, disposing of collateral can be time-consuming and costly.


    Credit Insurance Approach
    Credit insurance protects the receivables that arise from specific transactions, without requiring collateral.

    If a buyer does not pay, the insurance company will compensate the insured business

    (according to the policy terms), covering part or all of the unpaid receivables.

    As this insurance focuses on the creditworthiness of the buyer, companies can confidently grow

    their customer base—especially if their customers have good credit ratings—even if the company

    itself has limited collateral.
     

    What are the differences Between KODIT’s TCI and SGI’s TCI?
    소유자
    2024-12-26

    Operating Entity
    •    KODIT’s Accounts Receivable Insurance: Operated by a public institution (Korea Credit Guarantee Fund).
    •    SGI’s Accounts Receivable Credit Insurance: Operated by a private surety/insurance firm (SGI Seoul Guarantee).


     Eligible Companies
    •    KODIT: Primarily SMEs.
    •    SGI: SMEs as well as mid-sized and large companies.


     Scope of Coverage
    •    KODIT: Mainly domestic receivables.
    •    SGI: Can cover both domestic and international receivables.


    Cost & Flexibility
    •    SGI: Premiums can be higher but the policies tend to offer greater flexibility.
    •    KODIT: Often lower premiums due to policy-driven support. 

    Advantages of Credit Insurance as a Risk-Transfer Strategy
    소유자
    2024-12-26

    •    Risk Diversification: Unpredictable losses are transferred to another entity, bolstering a company’s financial stability.


    •    Operational Efficiency: Reduces the burden of risk management, allowing businesses to focus on core operations.


    •    Sales Growth Opportunities: With reduced concern over non-payment, companies can pursue more aggressive business strategies.


    •    Sustainable Growth: Protects a firm against unforeseeable default risks, establishing a solid foundation for long-term development.

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