Desnos: failures not fault of credit insurers

Insolvency experts still believe that credit insurance is a catalyst for corporate collapse, despite Euler Hermes’ chief executive insisting there was no “hand of God” at play in the sector.

Fabrice Desnos said that company failures were not spurred on by the credit insurance community deciding to withdraw cover from suppliers of major troubled businesses.

The lack of cover for suppliers has been highlighted as a contributing factor to companies such as Woolworths not being rescued.

“There is no hand of God here,” he told Accountancy Age. “Businesses decide to talk us or not knowing the likely implications. It’s their own judgment and weighting and a question of ‘Do I care about my suppliers being insured or not’.”

A recent survey by Moore Stephens highlighted the fact that insurers were still cutting back on credit insurance limits, citing it as “especially worrying for small and medium sized suppliers because it leaves them very exposed in their trading relationships”.

Catherine Matthews, partner at licensed insolvency practitioners Tomlinsons which deals with a lot of the SME community caught in the eye of at the heart of the recession, said: “Because more businesses are going bust, the insurers are hiking their premiums, being much more selective about who they offer cover to and are reducing the amount of risk they will take.

“Uninsured bad debts will lead to more suppliers themselves becoming insolvent and, with the banks being so unsupportive, this will undoubtedly lead to a rise in liquidations and administrations.”