9 November 2015Welcome to the 6th edition of Talking Credit, the Credit Insurance Newsletter
Welcome to the 6th edition of our newsletter. We hope it will prove thought provoking and highlight some topics that will be of interest to you.
The State of the Market
Competition for new business amongst credit insurers has highlighted that now is a great time to consider taking out credit insurance. Premium rates are keen. Appetite for risk has continued to improve. Indeed overall insurers are now writing higher levels of cover that they have done for many years. There is a markedly more flexible approach from insurers to accommodating a customer’s specific circumstances and requirements.
The message is to strike whilst the irons hot. Leaving it until a bad debt has prompted an approach for a quote could well dilute the benefits to be obtained from current state of the market!
As one would expect the number of company failures has reduced as the economy has improved. That said the statistics do not mean the risks aren’t there. The ongoing saga with Greece and the downturn in the Chinese economy are well publicised. Closer to home the march of the “zombie companies” on life support with the bank continues, but for how long?
A recent survey undertaken by QBE insurance revealed that UK businesses are becoming more worried about the trading environment and the ability of their customers to pay their debts. QBE indicated that those concerns were particularly marked in the Manufacturing & Engineering and Building & Construction sectors.
This year we have seen an increasing number of requests from companies wanting to reschedule debts owing to suppliers over a period of time. The credit insurers always help and advise in this scenario; initially they will provide feedback as to whether they have seen similar requests from the same company to other suppliers, and then they will advise whether the request should be accepted or refused in which case the debt should be referred for collection straight away.
Sometimes the debtor can trade out of its difficulties or on other occasions a debt is collected without delay to the benefit of the policyholder before insolvency occurs. By being insured and therefore part of a network of information, the policyholder benefits from the advice and guidance of the insurer and bad debts are kept to a minimum in the area of payment reschedules, which, sadly, are an increasing trend.
Cover for Disputed Debts?
Disputed debts have always been a standard exclusion from credit insurance Policies. In an innovative move the Trade Liner product launched recently by COFACE offers a number of special add on’s. One of which is the option of providing a provisional indemnity for disputed debts. COFACE will make an advance payment based on 70% indemnity and up to a maximum of £100,000.
Disputes can be a major cash flow headache especially for an SME business and all the more frustrating where the dispute has been raised merely as an excuse by the buyer to delay or, indeed to avoid, payment. The policyholder must continue to pursue the debt and should it ultimately be decided the buyer was “in the right” the advance payment must be repaid to COFACE. Notwithstanding, the policyholder will have benefited from the advance payment to ease cash flow in the interim.
Commercial Tenant Default Cover
This product has been much sought after by Landlords in the past and we are pleased to advise that a leading insurer has now entered the market. It provides rental income protection for Landlords against non-payment of business rents. This could be due to the insolvency of the tenant or simply default of their tenant. It will also provide cover for future rental income as a result of this, or it could be that the tenant chooses to relocate to another part of the country or even overseas.
Policy wordings are tailored around each Landlord’s individual contract and specific lease agreement with their tenants.
We also do “Travel”
Did you know that Arthur J. Gallagher are also one of the largest brokers of “travel bonds” in the market? We have a growing portfolio of client’s, including some well known large corporates and global operators.
Travel organisers in the UK are required by law to provide financial protection in respect of ‘package’ holidays. Bonding by insurance is a straightforward and cost effective way of fulfilling this obligation. The surety markets for travel are small in number and we have developed close relationships with all of the main operators.
A recent example of the service we can provide:
Placement of bonding totalling £7,450,000 for a high end cruise line operator, with an additional £2,150,000 unsecured capacity from prior year and releasing circa £2Mill of cash collateral to the balance sheet.
For more information please contact 0800 612 3640 or email firstname.lastname@example.org.
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