The Future of Credit Insurance

For any business with significant Debtors, previous experience of Bad Debts, current exposure to Carillion, Factoring or Invoice Discounting facilities or any practical experience of challenging cash flow, Credit Insurance can be a lifesaver!

To the uninitiated, Credit Insurance provides insurance cover for a company Debtor Ledger on a case by case basis. Effectively each counterpart is insured (up to an agreed maximum), and cover is generally at 85-90% of the debt. Then, if the debtor can't or won't pay, the insurer does and then manages their own exposure afterwards.

For many years, some of the major banks have provided cover, as well as bespoke Credit Insurers. However, it has recently come to light that at least one major bank is withdrawing this service and is referring its own customers to one of the existing specialists.

So what does this mean? Amongst other things :-

• This is one less thing the banks can / will do to help their customers
• Meaning it is another thing Businesses may have to organise for themselves
• Insurance Cover terms may change
• Cover may not be available for specific debtors any more, or may be at a lower level
• This might endanger long standing relationships if the supplier can no longer get insurance on the buyer
• Think about what might now happen if the Supplier was trading with a Buyer, who was themselves Sub-Contracting for Carillion? Realistically, will the Supplier now be able to insure its debts with the Buyer? Possibly not.
• Now consider the possibility of Company A having to find a new credit insurer because their bank doesn't provide cover any more, and the new policy doesn't cover a major existing client. How can Company A manage that - or do they just have to take much more risk?

As people come to understand more and more about Carillion, and we are reminded of the risks of monopolisation does it sit comfortably that a major insurer has closed its books?

Any business that insures it's debtor book, may be impacted. This means that there may be a knock-on effect for many, many businesses either directly or indirectly.

If you are unsure of how this might impact your business, or what the best course of action might be, please call us at Glenville Walker Consulting and arrange an initial consultation at no cost with our Banking Review team. Get in touch with Hazel Walker, Commercial Relationship Manager on 0151 305 9654 or hazel.walker@glenvillewalker.com