Why businesses need credit risk insurance?
A business man is so called because they were risk takers. The investors risk in losses is what we called credit risk. This credit risk arises because of the broken promises of the borrower to the lender or what we already called “default”. In this reason business, firms really need credit risk insurance for in these case investors losses not just the interest but also it includes the principal itself. In result together with the decreasing in business cash flows, this increase the collection cost of the firm. Common circumstances arise are consumer failed to pay their obligations. Some are because the business also is not responsible for their own obligations towards others, and there were still many reasons other than this.
