Trade credit insurance in Malaysia is a commercial insurance policy that protects a business selling on credit terms against the risk that its buyers don't pay. If an insured buyer becomes insolvent or simply fails to pay within an agreed period after the due date, the insurer pays out a set percentage of the unpaid invoice, commonly up to about 90% for commercial risk, and then works to recover the full debt from the buyer.
For a finance team, the policy sits alongside your own credit control. The insurer checks each of your major buyers before you ship, sets a credit limit it's willing to cover on each one, and keeps watching those buyers during the year, so you get a second opinion on your customers as well as a payout if one of them fails.
By the end of this page you'll know how trade credit insurance works day to day, what it covers and what it doesn't, which businesses it usually suits, and what an insurer will ask you for before it quotes.
This page is written for CFOs, finance directors, finance managers and credit controllers at Malaysian companies that sell business to business on credit terms, whether to local buyers, overseas buyers or both. We assume you already work with receivables, DSO and bad debt provisions every day, so we've skipped the accounting basics and focused on how the insurance side actually runs.
Not sure whether your receivables are big enough to insure?
Tell us about your receivables and we'll tell you whether trade credit insurance makes sense for your business, and what the insurers will ask you for. It's a short conversation, and you don't need to fill in a proposal form at this stage.
What is trade credit insurance, and how widely is it used?
Trade credit insurance, sometimes called credit insurance or accounts receivable insurance, covers money owed to you by business customers for goods or services you've already delivered. It doesn't cover consumers, and it doesn't cover loans. What's insured is the invoice during the period between delivery and payment, which for B2B sellers typically runs from 30 to 120 days.
The product is well established globally. The International Credit Insurance & Surety Association (ICISA), the industry body for private credit insurers, estimates that trade credit insurance supported around EUR 8.5 trillion of trade in 2023, about 15% of global trade, and it notes that advanced economies in Europe and Australia lead in adoption.
| Global indicator (2023) | Figure | Source |
|---|---|---|
| Share of global trade supported by trade credit insurance | About 15% (15.07%) | ICISA, 2024 trade insurance update |
| Value of trade supported | About EUR 8.5 trillion | ICISA, 2024 trade insurance update |
| Global premiums | Over EUR 15 billion | ICISA, 2024 trade insurance update |
| Share of cover written by private insurers (the rest by government-backed agencies) | About 72% | ICISA, 2024 trade insurance update |
In Malaysia, trade credit insurance is offered by private general insurers and by a government-owned development financial institution, and it's available in both conventional and takaful form. Because the product is less well established outside Europe, a finance team in Malaysia may have heard of it without ever being walked through how a policy actually runs, which is what the rest of this page does.
How often are Malaysian companies wound up for unpaid debts?
The Malaysia Department of Insolvency registered 1,739 compulsory (court-ordered) liquidation cases in 2025, an average of close to 5 a day, and in 1,728 of those cases the reason recorded was that the company couldn't pay its debts. The figures below come from its December 2025 liquidation statistics.
| Company liquidations in Malaysia, 2025 | Figure |
|---|---|
| Compulsory (court-ordered) liquidations registered in 2025 | 1,739, compared with 1,756 in 2024 |
| Of those, cases where the reason was that the company couldn't pay its debts | 1,728 |
| Largest sector: trade, wholesale and retail | 503 cases |
| Construction | 357 cases |
| Manufacturing | 154 cases |
| Voluntary liquidations registered in 2025 | 781 |
The total was roughly flat against 2024, so this isn't a sudden spike, but it's a steady level of company failures, and the sellers who supplied those companies on credit are among the creditors left unpaid. Trade, wholesale and retail businesses made up the largest group, which matters because distributors and wholesalers usually sell to other businesses on credit terms.
These numbers also understate the problem for a seller, because a liquidation is only the final formal step. Many unpaid invoices belong to buyers who never go into liquidation at all and simply keep paying later and later, which is why trade credit insurance usually covers non-payment as well as insolvency.
What does one unpaid invoice really cost you?
A bad debt costs more than the invoice value, because you have to earn that money back through new sales at your normal margin. The table below shows the simple math for a single RM500,000 write-off.
| Your net profit margin | New sales needed to earn back a RM500,000 bad debt |
|---|---|
| 3% | About RM16,700,000 |
| 5% | RM10,000,000 |
| 10% | RM5,000,000 |
Illustrative scenario, not a specific case. The figures are simple math (bad debt divided by net margin) and ignore tax and any recovery you might make later.
For a distributor or trader working on thin margins, earning back one large write-off can take millions of ringgit in extra sales, which is why the more useful question for a finance team is whether it could absorb the largest bad debt it's exposed to.
How does trade credit insurance work?
There are 3 parties: you (the seller and the policyholder), your buyer, and the insurer. Your buyer usually doesn't sign anything and often doesn't know the policy exists, although the insurer will assess the buyer's finances before agreeing to cover it.
| Step | What happens | Money flow |
|---|---|---|
| 1. Policy set up | You insure your credit sales (usually your whole book of B2B credit sales, or a defined part of it). The insurer sets the insured percentage, any deductible and the policy conditions. | You pay a premium to the insurer. |
| 2. Buyer limits | You ask the insurer for a credit limit on each significant buyer. The insurer approves, reduces or refuses each request. | No money moves. |
| 3. Trading | You sell to buyers on credit terms as usual and declare your insured sales to the insurer at the intervals set in the policy, commonly monthly or quarterly. | Buyers pay you as normal. |
| 4. A buyer pays late | You report the overdue account to the insurer within the deadline in your policy and stop further shipments when the policy tells you to. | No money moves yet. |
| 5. Collection and claim | The insurer tries to recover the debt. If it can't within the policy's collection period, it pays your claim. | The insurer pays you the insured percentage of the covered debt. |
| 6. Recovery after the claim | The insurer keeps pursuing the buyer for the full amount. | Recoveries are shared between you and the insurer according to the policy. |
The insured percentage is the part of each covered loss the insurer pays, and the rest stays with you so that you keep an interest in collecting well. ICISA says the payout usually ranges from 75% to 95% of the invoice amount. Around 90% is common for commercial risk, though the exact figure depends on the policy you buy.
What does trade credit insurance cover?
Trade credit insurance generally covers 3 kinds of non-payment. Which ones apply to you depends on whether your buyers are local or overseas, and on the policy wording.
| Cause of non-payment | What it means in practice | Domestic buyers | Export buyers |
|---|---|---|---|
| Buyer insolvency | The buyer is wound up, goes into liquidation or another formal insolvency process and can't pay its debts. | Commonly covered | Commonly covered |
| Protracted default | The buyer is still trading but just doesn't pay an undisputed invoice within a set period after the due date. | Commonly covered | Commonly covered |
| Political risk | Events in the buyer's country stop payment even though the buyer is willing, such as war, restrictions on transferring currency, or an import ban. | Not relevant | Often available as part of export cover |
Protracted default cover is important because a lot of bad debts start with a customer who keeps promising payment next month rather than with a liquidation notice, and a policy that covers protracted default responds to that situation without you having to wait for formal insolvency.
What doesn't trade credit insurance do?
These are the limits worth understanding before you buy, because they decide whether a claim is paid.
| Situation | Why it's usually not covered |
|---|---|
| Disputed invoices | If the buyer says the goods were wrong, late or faulty, the dispute generally has to be resolved in your favour (by agreement, a final court judgment or an arbitration award) before the insurer will treat the debt as a claim. |
| Buyers without an approved limit | If the insurer refused or cancelled a limit on a buyer, sales to that buyer after that point are at your own risk. Some policies allow you to cover small buyers under a discretionary limit you set yourself, within rules. |
| Late reporting or ignoring policy conditions | Reporting an overdue account after the deadline, or continuing to ship to a buyer after you should have stopped, can reduce the claim or lose it entirely. |
| Replacing your own credit control | The policy expects you to keep chasing payment, keep your own internal limits and act on warning signs. Insurers ask about your credit control before they quote because they rely on it. |
| Covering only the 1 or 2 buyers you're worried about | Insurers usually want to cover a spread of buyers, so a request limited to your riskiest customers is often declined or priced to match. |
Who does trade credit insurance suit, and who doesn't it suit?
Trade credit insurance works best for businesses where one buyer failing would really hurt, and where credit sales are large enough to make the policy worth the insurer's time. Insurers set a minimum premium, so below a certain level of credit sales the numbers usually don't work.
| It usually suits you if | It's usually not a fit if |
|---|---|
| You sell B2B on credit terms, typically 30 to 120 days | You're paid in cash or upfront |
| Your credit sales are meaningful and spread across a number of buyers | You have only a handful of customers or low credit sales, which usually can't reach the insurer's minimum premium |
| 1 or 2 large buyers make up a big share of your receivables | You only want to insure 1 or 2 risky buyers and leave the rest uninsured |
| You're a manufacturer, distributor, wholesaler, trader or exporter | Your receivables are mainly from construction work, which is often harder to insure |
| You're growing into new buyers or new countries and want a check on who you're trading with | Your bad debt history is very low and your balance sheet can comfortably absorb your largest buyer failing |
| Your bank or factoring company would lend more comfortably against insured receivables | You already have letters of credit or other security covering most of your sales |
If you're in the right-hand column, a policy is probably not the best use of your money, and tighter credit control, credit reports or factoring may do the job well enough.
Do 1 or 2 buyers make up a big share of your receivables?
Talk to Emerge about your buyer list. We'll look at how your credit sales are spread, tell you plainly whether the numbers are likely to work for an insurer, and explain what a policy would ask of your finance team during the year.
How do buyer credit limits work?
A credit limit is the maximum amount the insurer will cover on a single buyer at any one time. Insurers underwrite buyer by buyer, looking at each buyer's financial statements, payment record and sector, so you might get the full limit you asked for on one customer and a reduced limit or a refusal on another.
Limits aren't fixed for the year. If a buyer's finances weaken, the insurer can reduce or withdraw the limit, and ICISA explains that the new limit applies to deliveries made after the insurer's decision, so sales already made within the old limit generally stay covered. A refused or reduced limit is frustrating, but it's also useful early warning about a customer, and you can often respond by sending the insurer more information, asking for a review, or trading with that buyer on secured terms.
What will an insurer ask for before it quotes?
Expect a detailed proposal form. Insurers price trade credit case by case, so they need a clear picture of your sales, your buyers, your loss history and how you manage credit, and the quality of what you send them affects both the terms and how quickly you get them.
| What the insurer asks for | Typical detail |
|---|---|
| Credit sales | Gross credit sales by financial year, excluding intercompany sales, plus a forecast |
| Major buyers | Registered name, registration number, country, the credit limit you want, payment terms, estimated annual sales, and anything overdue beyond 90 days with the reason |
| Aged debtor analysis | Current, 1 to 30, 31 to 60, 61 to 90 and over 90 days overdue, plus a breakdown of debtors by size |
| Loss history | Bad debts for the last 3 years, the number of losses, the largest defaults, the reasons and what you did about them |
| Credit management | Written contracts, DSO, retention of title, internal credit limits, whether you get buyers' financials, how many days overdue before you stop supplying, and whether you use a collection agency |
| Financing and existing cover | Any factoring arrangement and with which bank, and any existing credit insurance policy and its renewal date |
| Sales by country | Where your buyers are, and whether any goods are dual-use or military items that need export authorisation |
You also have a legal duty to disclose any matter you know to be relevant to the insurer's decision. For business policies in Malaysia, this duty comes from Schedule 9 of the Financial Services Act 2013, which sets out pre-contractual disclosure rules, including for non-consumer (business) insurance contracts, so a buyer you know is in trouble has to be mentioned even if it's awkward.
Our walkthrough of what insurers ask for before they quote trade credit insurance goes through a real proposal form section by section, so you can prepare everything before you speak to anyone. For what drives the price, see how much trade credit insurance costs in Malaysia.
What does running a policy look like during the year?
A trade credit policy is something your finance team works with every month, so it's worth knowing the workload before you commit. The main recurring tasks are requesting limits on new buyers, declaring your insured sales, reporting overdue accounts on time and following the policy's rules on credit periods.
The timeline below shows how the deadlines fit together under one insurer's standard terms. It's an example only, because every policy sets its own periods.
| Stage | Example timing (one insurer's standard terms) |
|---|---|
| Invoice issued | Within 30 days of delivery |
| Credit terms on the invoice | 30 to 60 days, with extensions of up to 60 more days |
| Maximum credit period | 120 days from invoice date |
| Report the overdue account to the insurer | Within 30 days after the maximum credit period ends, and stop new shipments to that buyer |
| Insurer's collection period | 150 days (5 months) from notification, which can be shortened to 2 months in exchange for a slightly lower insured percentage |
| Claim paid | About 30 days after the collection period ends |
2 things stand out from this example. First, from invoice to claim payment can take close to a year, so trade credit insurance protects your balance sheet from a large loss but doesn't turn an unpaid invoice into quick cash. Second, reporting an overdue account late can reduce the claim or lose it altogether, which is why careful policyholders build the reporting deadline into their monthly debtor review.
Our step-by-step guide on what happens when your customer hasn't paid follows a claim from the first missed payment to the insurer's payout.
Domestic vs export trade credit insurance: what's the difference?
The mechanics are the same for local and overseas buyers, but export cover adds country and political risk and is usually priced and underwritten with those countries in mind. Some sellers do both, and a single policy can often cover domestic and export buyers together.
| Feature | Domestic cover | Export cover |
|---|---|---|
| Buyers covered | Malaysian buyers | Buyers outside Malaysia |
| Main risks | Buyer insolvency and protracted default | Buyer insolvency, protracted default and political or country risk |
| What the insurer looks at | Each buyer's finances and sector | Each buyer's finances and sector, plus the buyer's country |
| Useful for | Distributors, wholesalers and manufacturers with concentrated local buyers | Exporters entering new markets or selling on open account instead of letters of credit |
Export matters a great deal for Malaysian companies: the country exported RM1.6 trillion of goods in 2025, according to the Department of Statistics Malaysia. Domestic receivables can carry just as much risk, and domestic cover works in the same way, so it's worth looking at both sides of your sales ledger. If you export, remember that trade credit insurance covers the buyer not paying, while damage to the goods on the way is a separate risk covered by marine cargo insurance.
Why use a specialist intermediary for trade credit insurance?
You can buy trade credit insurance directly from an insurer, and some businesses do. The case for an intermediary is that insurers differ in which buyers, sectors and countries they're comfortable with, so the insurer that gives the best limit on your biggest customer may not be the one you'd have approached on your own.
| Stage | What a specialist intermediary does for you |
|---|---|
| Before you buy | Tells you plainly whether a policy makes sense, prepares the proposal with you and approaches more than 1 insurer |
| Structuring the policy | Helps you choose which buyers and countries to include, the insured percentage, the deductible and conditions your finance team can actually follow |
| During the year | Handles limit requests and reviews, keeps declarations and overdue reporting on schedule, and follows up when a limit is cut |
| When a buyer doesn't pay | Makes sure the notification goes in on time and manages the claim with the insurer through to payment |
| At renewal | Reviews how the policy performed and goes back to the market if the terms no longer fit |
Emerge works with finance teams as a specialist intermediary on exactly this: placing the policy and then doing the year-round servicing work that otherwise lands on your credit controller.
FAQ
What is trade credit insurance in Malaysia?
Trade credit insurance in Malaysia is a commercial policy that pays out if a business customer you sold to on credit terms becomes insolvent or fails to pay. The insurer pays a set percentage of the unpaid invoice, commonly up to about 90% for commercial risk, and then tries to recover the debt. It's offered by private general insurers and a government-owned development financial institution, in conventional and takaful form.
How much of an unpaid invoice does trade credit insurance pay?
Usually between 75% and 95% of the invoice amount, according to ICISA, and around 90% is common for commercial risk. The percentage you get depends on your policy, and some policies also have a deductible. You keep the remaining share of each loss, which gives you a reason to keep chasing the debt.
How much does trade credit insurance cost in Malaysia?
There's no standard rate, because trade credit insurance isn't tariffed and each policy is priced on its own facts. The main drivers are your credit sales volume, the quality and spread of your buyers, their sectors and countries, your loss history, your credit terms, the insured percentage and deductible, and how strong your own credit control is. Insurers also set a minimum premium, which is why very small credit books are hard to insure.
Is trade credit insurance suitable for small businesses?
It sometimes is, but often it isn't. Insurers set a minimum premium, so businesses with only a handful of customers or low credit sales often find the policy costs more than the risk justifies. If your credit sales are modest, tighter credit control, credit reports and secured payment terms may protect you well enough.
Can I insure only 1 or 2 customers?
It's usually difficult. Most insurers want to cover a spread of your buyers rather than only the ones you're worried about, because covering just the weakest buyers leaves them with all of the risk and none of the balance. If a single buyer is your concern, it's worth discussing secured terms or a letter of credit alongside insurance.
What happens if my customer doesn't pay?
You report the overdue account to the insurer within the deadline in your policy and stop further shipments to that buyer when the policy says to. The insurer then tries to collect the debt, and if it can't within the collection period, it pays your claim. Reporting late can reduce or lose the claim, so the deadline is one of the most important parts of the process.
Is trade credit insurance the same as factoring?
No, they do different jobs. Factoring turns your receivables into cash early by selling or borrowing against them, while trade credit insurance protects you against the loss if a buyer doesn't pay. The two often work together: banks and factoring companies generally see insured receivables as lower risk, and some ask for the policy to be assigned to them, which is why insurers ask about factoring on the proposal form.
Is trade credit insurance available as takaful in Malaysia?
Yes, trade credit takaful is available in Malaysia alongside conventional trade credit insurance, covering domestic, export and import transactions. The protection works in a similar way, with the policy structured under takaful principles, so businesses that prefer Shariah-compliant arrangements can ask for it when they compare options.
Emerge Conclusion
Trade credit insurance is a well-established way to protect a balance sheet from a large customer failing, and with 1,739 compulsory liquidations registered in Malaysia in 2025, it's worth looking at before your next big buyer starts paying slowly rather than after. It also comes with real obligations, from limit requests to strict reporting deadlines, so the right policy is one your finance team can run as well as one that pays.
The useful question to ask now is how much of your receivables sits with your top 5 buyers, and what would happen to this year's results if the largest of them didn't pay. If that answer makes you uncomfortable, Emerge can tell you whether your credit sales are likely to be insurable, what the insurers will ask for, and how to get cover in place.
Talk to Emerge about trade credit insurance for your receivables
Disclaimer: This article provides general information about trade credit insurance available in Malaysia as of September 2026, with reference to the Financial Services Act 2013 and published data from ICISA, the Malaysia Department of Insolvency and the Department of Statistics Malaysia. Policy terms, insured percentages, timelines and conditions vary between insurers and policies, and the example timeline shown is one insurer's standard terms only. Nothing in this article is a quote, an offer of cover, or a promise that a buyer limit, a claim or bank financing will be approved. Always review the specific policy wording and consult qualified insurance and legal advisors before making decisions.
