New figures show more claiming and bigger payouts
Association of British Insurers’ (ABI) figures out today say UK credit insurers have faced a 59% hike in claims bills as more companies fail to pay suppliers.
Claims in the third quarter rose to £97m from £61m the same time last year. The ABI says 6,805 suppliers made claims to insurers as purchasers entered administration and failed to pay their bills. That is up 34% on the previous year.
The claims tally is 41 per cent higher than in the previous quarter despite the number of claims rising by less than 20%.
The number of companies taking out credit insurance increased by 10% during 2007. This is the third consecutive year that the market has grown, with a 40% rise since 2004.
Nick Starling, the ABI’s Director of General Insurance, said: “It is positive news that there is a greater awareness amongst small businesses as to the value of trade credit insurance during periods of increased risk and volatility. The economic slowdown has driven the number of policies up to near-record highs. While the economy is in decline, trade credit insurers expect to pay out more claims during 2008, as business insolvencies rise.“
The FT quotes Starling as saying: “Trade credit insurance claims figures are a good indicator of what is happening in the UK economy and how that is affecting UK businesses.”
But elsewhere the FT quotes Nick Hedley, chairman of the financial risk division at the broker Jardine Lloyd Thompson, as saying: “In the past five or six years, credit insurers have become inappropriate and undisciplined in the cover they offer.”
In a story called 'Don't join backlash' urges turnround specialist, the FT also reports Adrian Doble, client partner at Vantis Restructuring Services, as saying: "We forget that credit insurance is underwritten on behalf of a supplier of goods against the default of its customer. The customer relationship is with the insured, not with the risk. When the credit insurer downgrades a risk or 'pulls cover' it is actually fulfilling a duty of care to its re-insurance partners and its customer, the insured.”
