First McCains UK – the frozen food company. Euler Hermes pulled insurance
from suppliers because it could not get monthly management accounts from
McCains. This was just before the annual accounts were due to be filed. There is
no legal requirement for this kind of reporting and, indeed, McCains filed their
statutory accounts and they show the business is buoyant. Presumably Euler
Hermes will now happily reinstate insurance to suppliers so that everyone can
get on with their business.
In the case of retail group Alexon, it was expected to receive an ‘emphasis
of matter’ statement from the auditors of its Bay Trading unit. This caused
Euler Hermes to pull insurance from suppliers, propelling the division into
administration. The problems are not restricted to Euler Hermes but these cases
demonstrate how the crisis is becoming acute, even precipitating company
At McCains the action seems to have been premature. Even if so called’
management accounts’ were not available publicly, the insurer could have carried
out its own checks?
The worry now is that plans announced in the Budget for the government to
become a trade credit insurer might not work if it was to apply the same
‘crisis’ criteria that seems to have gripped Euler Hermes and others.
The McCains incident shows how extreme the thinking of insurers has become.
Making very serious decisions on a level of information never before required is
changing the game just when companies need to be cooperating. Let’s hope that
government plans will be more sympathetic.
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