Beta Distribution 'hopeful' of restoring lost credit insurance
Withdrawal of credit insurance by some providers a 'reflection' of current challenge facing IT sector, according to MD Steve Soper
Beta Distribution has confirmed to CRN that multiple credit insurers have withdrawn cover from the distributor, but has positioned it as an indicator of the challenges currently facing the IT sector as a whole.
CRN understands that Atradius and Euler Hermes have pulled their cover on the £180m-revenue firm in recent months.
On a separate note, key vendor partner Netgear has also confirmed to CRN that it and Beta have parted ways, but said the split was "amicable".
In a statement to CRN Steve Soper, MD of Beta, said he is hopeful that cover will be restored.
"I can confirm that there has recently been a withdrawal of credit insurance on Beta Distribution plc from some providers.
"While this is far from ideal, it is as much an indication of the challenges that the wider IT sector faces as it is a reflection on our own financial performance."
For its financial year ending 31 March 2017, London-based Beta saw turnover of £186m and net profit of £950,000. Results for its fiscal 2018 are due to be published at the end of this month. This year, the firm - which lists Canon, Brother, Quantum, Overland Storage and Drobo among the vendors on its website, has acquired an audiovisual services firm, ContentWall, as well as closing a small satellite office in Telford.
Soper said that the company's full-year forecasts for its current year are for profits to be at "record levels" and "significantly ahead" of the previous trading period.
The eye of the storm
Mike Stott, insurance broker at credit insurance specialist Rycroft Associates, told CRN that the credit insurance landscape "is in the eye of the storm", in light of numerous high-street retailers and construction giant Carillion folding.
"[These closures] feed fear which causes people to take up more credit insurance, but credit insurers only have so much capacity that they can write on businesses," explained Stott.
"A lot of people are going to the frontline underwriters - like Atradius, Euler Hermes and Coface - to buy cover and then they find out further down the line that limits are being pulled or reduced.
"Part of this is that the financial information isn't good and some of it is simple capacity management."
Stott added that there are enough companies in the market to provide credit insurance at the moment, but the bigger players are quickly running out of capacity for cover.
He cited Euler Hermes as an example of this, after it added a large number of new clients to its books earlier this year when RBS announced it was no longer providing credit insurance to customers.
Smaller insurance companies are picking up this overflow business but Stott said it is inevitable that they too will eventually start to run out of capacity.
"We are beginning to see more people coming to a market where financial figures aren't great - which also reduces capacity - more people buying insurance because they are worried and fewer players to provide the cover," he said. "That means ultimately there is a capacity drain on the market."
Credit insurers will be on their guard when it comes to the volume IT channel following a brace of large bankruptcies, namely Entatech in 2016 and Misco UK in 2017, which went under with debts of £9.7m and £21.8m respectively.
Andrew Henderson, CEO at memory and data storage distributor Simms International, told CRN that he has not noticed any recent changes in credit insurers' behaviour around providing cover in the channel, but this may change with the economic uncertainty surrounding Brexit.
"We haven't noticed any reduction in credit limits in the channel significantly over this year but that's not to say it won't change," he said.
"I think with everything around Brexit and a possible recession, we would expect them to adjust limits and premiums accordingly.
"In this current climate they will probably be more cautious than they perhaps normally would be."
In a statement, Oliver Randall, UK regional sales manager at Netgear, said: "We can indeed confirm that we are no longer working with Beta Distribution, although our parting of ways was an amicable one. Recent changes in our company and the split with Arlo means that we are now streamlining our channel and no longer have a need for four mainline distribution partners."
CRN was awaiting comment from both Atradius and Euler at the time of publication.