If you use our collection service, we will also reimburse part of the collection costs. This is how it works:
Example 1: Debt equal to or lower than your limit
Let’s say you have an agreed credit limit with a customer of EUR 10,000 and you have an outstanding debt of EUR 10,000. We cover you up for the full debt. When you place your collection case with us, we will try to recover the whole debt: EUR 10,000.
At this stage, we will do a pre-assessment of the debt-covered percentage, which is the ratio between your cover and your total debt. For example, with a EUR 10,000 limit and a EUR 10,000 debt, your debt-covered percentage is 100%. If your debt is higher than your credit limit, then your debt-covered percentage reduces.
For collecting that EUR 10,000, we charge a fee that covers our work and any legal costs. In this example, let's say no legal action is required so the fee is just the commission fee of 10% or EUR 1,000, and assume your policy indemnity is 90%.
The indemnification of the costs applies as follows:
Fee (legal and commission) x Debt covered % x Policy indemnity % = Euler Hermes indemnification.
We will then indemnify you:
EUR 1,000 x 100% debt coverage x 90% policy indemnity = EUR 900.
In the end, the cost is reduced and instead of EUR 1,000, you would only pay EUR 100 + full VAT for the recovery of the EUR 10,000 debt (a cost of 1% of the amount collected).
If your terms and conditions with your customer allow you to recover collection costs, we would try to recover this amount as well and therefore you would have recovered the debt at no cost.
Example 2: Debt higher than your limit (overtrading)
Let’s say now you have an agreed credit limit with a customer of EUR 10,000 and you have an outstanding debt of EUR 12,000, higher than your limit. We cover you up to EUR 10,000 of the debt but will try to recover the whole debt: EUR 12,000.
As in the previous example, we’ll charge a fee of 10% (EUR 1,200) and let’s assume your Policy indemnity is 90%. Your debt-covered percentage will be EUR 10,000/EUR 12,000 = 83%.
Following the same formula as in the first example, we will then indemnify you:
EUR 1,200 x 83% debt coverage x 90% policy indemnity = EUR 896.40.
In the end, the cost is reduced and instead of EUR 1,200, you would only pay EUR 303.60 + full VAT for the recovery of the EUR 12,000 debt (a cost of 2.5% of the amount collected).
Our tariffs vary depending on different circumstances, such as the country your customer operates in. These are agreed at the start of your Policy and outlined in your Policy documentation. You find the tariffs here.
Please note we cannot contribute to your internal administrative costs and expenses.