The Rise of Credit Insurance(Case Study)

Overview
The significant rise of insurance in the US to 25% is likely to protect Business receivables. The majority
of companies identified account receivable as one of the top three assets. In reality, customer payment default
is more likely to occur compared with fire, flood, or theft. In case customer default in payment, regardless of
the reason, the business can still receive the amount collectible.
For many businesses, the reduced credit risk, increasing sales, and better financial standing attracted
them to get credit insurance. Credit insurance helped risk managers in many ways. To compete in the
international markets, American companies need to adopt in managing risk through credit insurance.
Below is a hypothetical number of months construction companies had to subscribe to the credit risk
premium of business with almost the same amount of capitalization and the result of the recent economic
crisis. The code one (1) means the company survives and zero (0) means they did not make it.

1.2

0.8

0.6 A
B
0.4

0.2

0
0 2 4 6 8 10 12 14

Analysis;
Log-Rank Test, the failure rates of trials A and B are 12/9.828 = 1.221 and 8/10.172 = .786.
Thus the hazard ratio h (of A to B) is 1.55. Since h > 1, the drug in trial B has a more favorable survival
rate than the drug in trial A (in fact 55% more favorable).