Credit insurer 'cautious' over cloud market

But Atradius tells CRN it is keen to increase exposure in wider IT channel against backdrop of low claims levels

Credit insurer Atradius has told CRN it is "open for more business" in the IT channel but has sounded a note of caution over companies operating in the cloud arena.

Atradius currently has exposure to 7,000 firms in the UK ICT sector, making it one of the two largest underwriters of credit into the channel alongside Euler Hermes.

Arwel Roberts, senior underwriter at Atradius, said his firm is increasing exposure to a sector that is enjoying historically low levels of insolvencies and claims.

However, within ICT, telecoms and cloud are two sub-sectors on which the insurer is keeping a "close eye", Roberts added, citing the recent collapse of Phones 4u – from which it sustained an eight-figure loss – and fears the cloud market has overheated.

"One area we are a little bit more cautious about is companies involved in the cloud area," he explained.

"There has been significant investment in the last few years in companies moving into the cloud. Quite a few providers have spent a lot of money upfront developing their systems, but uptake has not been as quick as people expected. We are not hugely worried about it but it's an area we are keeping an eye on."

In the five months to May, claims from within Atradius' electronics portfolio made up just three per cent of the total UK number, despite representing 10 per cent of the total book, he said. ICT is the vast bulk of its electronics book.

Roberts revealed that the number of ICT firms Atradius covers has risen by 500 so far in 2015 as it increases its penetration of the market.

"It's a sector we are comfortable with and are actively open for new business," he said.

"Over the last few years, the IT sector has made massive strides forward in terms of sharing information. It's a heavily insured industry, and people know what we do. Being unable to write credit limits due to a lack of information is very much a rarity these days, so keeping those channels open is key for us."

Claims Atradius paid out to suppliers of Phones 4u meant its electronics segment contributed a whopping 60 per cent of the total UK number last year and Roberts said the retailer's collapse fits with recent patterns in the sector.

"Claims [in the IT sector] for the year to date in 2015 are running at roughly half what they were last year. But we had significant claims levels from Phones 4u towards the back end of last year," he said.

"We are seeing fewer insolvencies but when they happen they tend to be bigger. In the last few years we have seen Phones 4u, 2e2 and KMS [go under], but we are not seeing a huge amount of small insolvencies or claims. Whereas six or seven years ago, we were seeing a large volume of claims but each for a small amount."

He added: "We are keeping a close eye on the telecommunications market because of what happened with Phones 4u. We looked at that sector in quite a lot of depth over the the last 12 months but we are reasonably comfortable with what is going on in that sector and hope it's a one off."

Catch the next issue of CRN to read the full interview with Roberts.