On Thursday. IRDAI said that an insurance company should essentially assess the credit risk of any purchaser who contributes more than 2 percent of the total income of the policyholder while revising procedure regulating the credit insurance business.
For giving a fillip to the expansion of the credit insurance market, Irdai said it is essential to revisit the 2010 strategy which controls the credit insurance business in India.
“A trade credit insurance policy shall not be issued to banks/ financiers/ lenders. An insurer shall necessarily assess the credit risk of any buyer who contributes more than 2 percent of the total turnover of the policyholder,” said the revised guidelines.
“A trade credit insurance policy can be sold to the seller on whole credit turnover basis only, covering all buyers.
“However, if the seller prefers to take credit insurance cover for a particular segment/product/or country, the same shall be allowed provided the cover is taken for the whole credit turnover of all buyers of that particular segment/ product or country,” it said.
IRDA also said that the insurance company should have internal risk organization guidelines to assess “trade credit risk on the buyer, giving credit limits on the buyer and buyer credit limit review”.