Credit insurance premiums set to rise
Big three - Euler Hermes, Atradius and Coface - are all still concerned about the high level of insolvencies in the UK market
Credit insurance premiums are set to be hiked as concern lingers over the high level of insolvencies in the UK.
According to a blog posted by credit reference specialist Graydon, credit insurers are asking for more disclosure from debtors to "enable them to base their underwriting decisions on the most up-to-date position".
The Graydon blog points to Euler Hermes’ UK Risk Bulletin for 2012 which reveals it began the year with a “sense of nervousness” as it expected levels of insolvencies to remain high.
“It is clear that it is not just smaller entities failing," said the Euler Bulletin. Insolvencies are not increasing in volume, but are definitely increasing in size.”
It continued: “When the crisis hit in 2008/09 trade credit insurers had a lot of companies for which they couldn’t get quick information and they had to act very quickly in the face of greater than expected losses.
“There was too much insufficient data. They’ve certainly learnt their lesson and have since built up databases significantly. Their risk assessment is much better.”
The Graydon blog added: “From SMEs to larger firms, some would argue, we may see a slight upward trend in the demand for credit reporting and monitoring. This will however, depend on the perceived value that firms place on their risk. Whether you insure your credit risk or not, it is always prudent to rely on credit ratings and reports that are approved by major credit insurance companies in order to base your decisions on the best information available.”
In a statement sent to CRN, Alun Sweeney, director of Atradius, UK and Ireland, said changes had to be made.
“In terms of pricing, if there is anything trade credit insurers would change about the lead up to the downturn, it would be that risks should have been priced appropriately,” he said.
“The industry has undergone a necessary correction since this time. We are writing new business across all sectors, on a case by case basis, at prices commensurate with the risks concerned.
“However, at Atradius, we also acknowledged that we could increase the benefits to our customers accordingly, so we implemented some key improvements. Today we offer our customers detailed information on their buyers, access to our underwriters, 30 days advance notification of reductions of cover, and immediate notice of reinstatement of cover.”
He added: “We believe that you get what you pay for and we’re proud of the added value we provide to businesses who require an underwriter assessment of the financial strength of suppliers where credit is offered and risk mitigation to protect the customers’ bottom line.”