
Most multinationals insure their entire receivables book by default. That's a habit, not a strategy.
The most efficient credit programs today take a different approach: they insure deliberately, not comprehensively. In an earlier article, we outlined three structural options for CFOs seeking efficiency in their trade credit arrangements. This article goes deeper — and makes a sharper argument.
Start with the shape of the risk
In our work with multinational clients, we consistently see the same pattern: somewhere between 5% and 10% of buyers represent 70% to 85% of the receivables exposure. The remaining 90+% of buyers, the long tail, behaves like an actuarial population: many small risks, predictable losses, low risk-to-value ratios and very limited ability to change quarterly results in any direction. The risk profiles of the head and the tail of the distribution are fundamentally different. Treating them with the same insurance structure isn't prudence, it's a category error.
Two designs that should not be conflated
Within high excess-of-loss structures, the market often blurs the lines between two designs that should be kept separate:
Both structures are legitimate. But for strong-balance-sheet multinationals, the second is increasingly the better fit — and the case is straightforward.
Named-buyer cover with monitored tail: Why the economics work
- Insurance capacity is concentrated where it is needed and where insurers want to deploy it. This improves pricing and limit availability on the names that are important to the business.
- The administrative workload drops dramatically; limit applications, declarations, and compliance obligations on the long tail disappear. This often removes 60-80% of the back-office workload that the central finance function does not see but pays for.
- The tail becomes a managed cost rather than an insured one, and bad debt on a diversified small-buyer population is statistically predictable enough to provision cleanly under IFRS 9 expected-credit-loss frameworks.
- The working capital benefits remain intact for the names that matter, because banks and securitization providers primarily lend against large, high-quality exposures precisely the ones retained under named-buyer cover.
The CFO ends up with a program that is smaller, sharper, and more strategically defensible than the one it replaces.
The operational test
The model only works if the monitoring infrastructure is truly in place. Credit information feeds from established international and local providers need to flow into the credit-management module, often purchased on a data-only basis from credit insurers themselves, the same insurers whose cover is no longer being bought on the long tail. Internal scoring and watch lists, increasingly supported by AI, sit on top of that data inside the ERP. Defined escalation triggers, such as payment delays, rating downgrades and sector signals, automatically move a buyer from the monitored pool into either the named-cover pool or a stop-shipment review.
Provisioning discipline linked to expected-credit-loss models gives the whole system its accounting backbone, and the IFRS 9 alignment is a useful by-product rather than a problem: the same data that drives the provisioning drives the monitoring process.
None of this is a leap of faith. It is operational maturity that many multinationals have already built for other reasons and simply haven't yet repointed at their credit insurance design.
Where named-buyer cover does not fit
The model is not right for all companies, and it is important to be precise about its limits:
Related content
Naming these boundaries does not weaken the argument; it sharpens it. Named-buyer cover with portfolio monitoring is not a universal answer. It is the right answer for the organization that has both the balance sheet to absorb the tail and the operational infrastructure to monitor it.
A better framing
For most of the last 20 years, multinationals have asked themselves: ‘What should we insure?’ The answer has too often been: ‘Everything.’
The better question — the one that produces leaner programs, better capacity on the names that matter, and meaningful annual savings — is: ‘Where does insurance create real value, and where can we manage risk more efficiently ourselves?’
Insurance, like every other tool in the CFO’s kit, works best when it is used precisely. Used everywhere, it is just an expense.
Further information
To find out more about how you can optimize efficiency and unlock the full potential of your trade credit insurance program, get in touch.
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The better question…is: ‘Where does insurance create real value, and where can we manage risk more efficiently ourselves?’

