Open for business

Atradius' Arwel Roberts tells CRN the credit insurer is seeking to increase its exposure in the IT channel despite recent spate of high-profile bankruptcies

The bankruptcies of 2e2, Comet, KMS and Phones 4u have made it a bumpy couple of years for credit insurers. But Atradius underwriter Arwel Roberts claims his firm is open for business in the channel in a recent chat with CRN.

CRN: How large is Atradius' exposure in the IT sector?

AR: We are definitely one of the top two credit insurers in the market, with Euler being our main competitor. At the end of 2014, we had exposure to roughly 12,500 companies in the electronics sector and 6,500 in IT specifically.

This year it has gone up to 7,000, so we are writing cover against about 500 more companies. These 7,000 firms are not policyholders, but companies our policyholders have credit limits on that we insure.

What is your current appetite for risk in the IT channel?

Our exposure in the IT sector on a like-for-like basis continues to increase and if I looked at all the sectors and ranked them from highest to lowest risk, it would be pretty much in the middle.

For the year to date, our electronics portfolio - which makes up 10 per cent of the UK book - has accounted for three per cent of claims. And claims are running at roughly half what they were last year. But that does not factor in Phones 4u, which falls into this portfolio and led to a significant level of claims towards the back end of last year.

Six or seven years ago, we saw larger volumes of claims but they would be for a relatively small amount; now there's a lower volume of claims but when they come along they tend to be big. When a big one does come along, we look at our internal processes and see if there is anything we could have done differently, but the truth is, when Phones 4u went under, we looked at the processes and didn't really change anything. So our attitude to risk post-Phones 4u and 2e2 is pretty much unchanged.

Are you more worried about some parts of the IT channel than others?

There's nowhere really we are retrenching. But we are keeping a close eye on telecoms because of what happened with Phones 4u. We have looked at that sector in a lot of depth over the past 12 months but we feel reasonably comfortable with what's going on there and hope it's a one-off. Another area where we are potentially a little more cautious is companies involved in cloud. There has been a significant investment in the past few years in companies moving into cloud but revenue growth hasn't quite been what people expected.

What are your key messages for CRN readers?

For electronics to be 10 per cent of our overall UK book, it's pretty big for us but we do have scope for growth. It's a sector where we are actively open for new business.

Over the past few years, massive strides have been made [among IT resellers] in terms of sharing information. The channel is a heavily insured industry and people know what we do. Being unable to write credit limits due to a lack of information is a rarity these days, and that needs to continue. If there are any problems, keep us abreast of them, as we are able to deal with them better upfront than if we hear about them from elsewhere.

It's a sector we are comfortable with but big shocks happen occasionally and I would urge companies that do not credit insure on the basis they have a blue-chip client base to be extra careful. Clearly there is some value we offer which has been proven in these large insolvencies recently.

How much did you lose from Phones 4u and how much of its debt was insured?

The level of claims we pay will be an eight-digit amount in total. With the impact of the Phone 4u claims, total claims in our electronics portfolio made up 60 per cent of all claims we paid in the UK last year. The KMS [a distributor which collapsed in January 2014] figures also fed into last year and that ramped up our claims.

Quite a lot [of Phones 4u's debt] was insured but quite a lot wasn't. Moving out of the IT sector slightly, people historically have had clauses in their polices that exclude blue-chip firms. But we are seeing the reversal of that trend as people become more nervous about bigger companies and want to include them in their polices. If they receive a bad debt of that magnitude, it could be catastrophic for their business.