Your credit insurer has cut the limit on a key customer. What the cut means, how to ask for a review, and where else cover can come from.
The email arrives on a Thursday afternoon. Your credit insurer has reduced the limit on one of your biggest customers, with effect from today. You have orders booked for next week, and the new limit will not cover them.
Here is the short answer. A limit cut normally applies only to deliveries made after the date of the change. What you have already shipped, within the old limit, usually stays covered. You then have four sensible moves: find out why, ask for a review with fresh information, look for extra cover elsewhere, or change the terms you trade on. The one move to avoid is carrying on as before and hoping.
If you are new to the product, our plain-English guide to how credit insurance works covers the basics first.
Limit cuts are in the news. In August, Allianz Trade was reported to be cutting credit limits on new trading with the housebuilder Vistry, by as much as 70% for some suppliers, according to the Financial Times. Vistry said credit insurers still provide substantial cover for its supply chain and that it knew of no supplier stopping trade because of the changes. In October the FT reported that Coface, Allianz Trade and Atradius had reduced cover, or stopped writing new cover, for suppliers to UK housebuilders including Crest Nicholson and Vistry.
In September, credit insurers stopped providing new cover to some suppliers of Poundland, Retail Gazette reported, as its owner ran a sale process. On 29 October, Poundland filed notice of its intention to appoint administrators.
The wider backdrop is not easing. On 5 November the Bank of England raised Bank Rate from 3.75% to 4%, its first rise since 2023, and said it expects inflation to reach about 5% by the middle of next year. Customers who borrow to fund their stock and their payroll will feel that.
An insurer sets a limit using information most suppliers never see. That includes how the customer pays every other policyholder who sells to it, not just how it pays you. It also watches filings, late accounts, profit warnings, changes of owner, covenant pressure and the health of the sector.
When those signals turn, the insurer acts early, because its own money is at stake. The signals are usually about cash. We have read the administrators' reports for 528 recent UK administrations. Strain on working capital was named in 85% of them. A failed attempt to refinance was named in 58%, and a lender or investor withdrawing funding in 35%. Those are the pressures an insurer's data tends to pick up first.
Where the administrators gave an estimate, nearly nine in ten expected to pay unsecured creditors nothing.
A cut is a decision about future deliveries. It is not a claim that the customer will fail, and many customers whose limits are reduced go on trading for years.
It is also not a reason to panic about the past. Goods shipped before the change, within the old limit, normally remain covered on the usual policy terms. Check your wording for the exact date the new limit takes effect and how it treats orders already accepted.
What it does mean is that anything you ship above the new limit from that date is at your own risk. If the customer then fails, the excess is your loss. This is one of the most common reasons a claim is reduced, as we explain in when credit insurance won't pay.
Be aware, too, that cuts can feed on themselves. When several suppliers lose cover at once, some ask for shorter terms or payment up front, and that squeezes the customer's cash further. It is one more reason to act quickly and calmly.
Take three numbers: what the customer owes you now, what is due to ship in the next few weeks, and the new limit. The gap between the second and third is the decision you have to make.
Insurers rarely publish their reasons in full, but a broker can usually get the underwriter's view: late payment to other suppliers, overdue accounts, a weak set of results or a sector-wide change. The reason tells you whether a review has any chance.
An insurer will not reverse a decision because you ask nicely. It may move if you give it information it did not have. The most useful items are:
If your insurer will not move, others may. Top-up cover, offered by some insurers, sits on top of your main policy and covers a named customer above the limit your own insurer will give. A single-customer policy from a different insurer is another route. There is capacity in the market.
Extra cover costs extra premium and comes with its own terms. It is worth pricing against the margin on the orders it protects.
You can reduce the exposure rather than insure it. Shorter payment terms, a deposit or stage payments, payment before dispatch on larger orders, and a properly drafted retention of title clause all shrink the amount at risk.
Sometimes the right answer is to keep supplying an important customer above the limit. If you do, set an internal limit, agree who signs it off, and review it each month. An uninsured exposure that someone chose is very different from one that nobody noticed.
Cover will not follow you above the new limit just because you disagree with the cut. It will not reinstate a limit because the customer has always paid in the end. Top-up and alternative cover are not guaranteed to be available on every customer, and a review is not guaranteed to succeed. None of it covers a customer that disputes your invoice rather than failing to pay it.
Partly true. The insurer has its own money at stake, and that is the point. It is telling you, with more data than you have, that something has changed. You can disagree and make your case, and sometimes you will win. But a limit cut on a key customer is the cheapest warning you will ever get. The expensive version arrives later, as an administrator's letter.
A limit cut normally applies to new deliveries only, so goods already shipped within the old limit stay covered. Work out your exposure, ask why, and ask for a review with fresh accounts and a specific request. If your insurer will not move, look at top-up cover or another insurer, and tighten your terms. If you choose to trade on uninsured, make it a written decision. You can check a customer's risk yourself with our free tools.
If an insurer has just cut a limit on one of your customers, send us the notice. We will tell you whether it is worth appealing, what the underwriter will want to see, and where else cover might come from. You can also read more about how we arrange credit insurance.
This article is a general explanation. Every policy wording differs, so check yours.
