Anxious credit insurers in the spotlight for pulling cover

It’s happened in the past, and it’s happening again……credit insurance policyholders are beginning to criticise the insurers for “taking down their umbrellas when it starts to rain”. In other words, as the economy takes a distinct turn for the worse, insurers are pulling cover on their policyholder clients, leaving them exposed to risk.

JJB Sports and DSG, owners of PC World and Currys, are two of the biggest companies that the credit insurers are reducing their exposure on. Suppliers to these groups will now have to take on the risk of bad debt themselves.

Is the criticism fair? It’s easy to see the situation from both sides of the debate. On the one hand, credit insurers are experiencing a significant upsurge in claims, as the number of insolvencies rise dramatically. Clearly, like most analysts, they’re looking ahead, and seeing that the situation will get worse before it gets better. On the policyholder side of the argument, they’ve paid a premium for insurance cover, and now they’re seeing that protection being eroded at a time when they need it the most.

The CEO of Euler Hermes, one of the leading credit insurers said the other day that “this is the perfect storm”. Everything has gone wrong at the same time”. Worrying words indeed. Companies out there in the real economy are going to find life tough in the months ahead, that’s for sure. They’re are going to have to find a way of surviving without easy access to finance from banks, less protection form credit insurers, and extra pressure from clients not prepared to pay for goods on time. A classic case of “when it rains, it pours, methinks”!

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