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The indemnity being provided to the policyholders under trade credit insurance should be increased, according to an expert panel formed by the Insurance Regulatory and Development Authority of India (IRDAI)
In its recommendations submitted to the insurance regulator, the special panel on reforms in trade credit insurance suggested that the indemnity should be increased from present 85 per cent 90 per cent for all policyholders, and to 95 per cent to MSMEs in case of political risk.
Wider reach
Banks, factoring companies, financial institutions, and similar entities should be allowed to avail credit insurance to cover trade related transactions which is not permitted now. However, they should not be permitted to cover loan default of the seller, it added.
Reserve Bank of India should also recognise credit insurance products as risk mitigation tools for banks to make it eligible for capital relief, the panel suggested.
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