Credit insurers set to review channel policy

Circuit City Chapter 11 saga prompts insurance giants to revisit their exposure to channel companies

Andy Gass: The collapse is going to have an effect on the view vendors take

Credit insurers are reviewing their exposure to the channel following the first large-scale channel casualty since the start of the credit crunch.

Circuit City, the number-two US electricals retailer, filed for Chapter 11 bankruptcy protection last week, owing HP and Samsung a combined $234m (£155m).

Andy Gass, managing director of distributor Computer 2000 (C2000), said its collapse could have far-reaching implications for the UK channel: “This is bound to have an impact on the view vendors and credit insurers take on exposure to the sector.”

Credit insurer Atradius admitted it may scale back its exposure to the IT sector. A representative for the firm, which recently reduced cover for some of Dixons Store Group’s suppliers, said: “IT and electronics are just some of the products hit by the financial slowdown. We are pulling back cover in some cases, but are continuing to work with businesses.”

Meanwhile, rival Euler Hermes stressed it would take a case-by-case approach to the sector.
Euler chief executive Fabrice Desnos said: “It is true that firms are not as credit worthy now as a year ago, but this is across all sectors. The electricals sector is performing better than other sectors.”

As CRN went to press, rumours were circulating that one of the big credit insurers was reviewing its policies with a major UK distributor. Euler and Atradius said they did not comment on specific cases.

“Channel firms are more likely to be successful in the next two years if they treat credit insurers as strategic partners,” said C2000’s Gass.