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
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.”
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