GVNW announces credit risk event as energy fears rise among German firms

The German risk and insurance management association, the GVNW, has announced a virtual event focused on the topic of credit risks and insurance of bad debts, as fears grow that Europe’s leading industrial nation is facing a credit crunch and rise in insolvencies. The event, ‘Credit Risks – Current Aspects of Insuring Bad Debts’, will be held on 30 November at 09:00am to 12:30pm CET. The GVNW said the discussion will be led by experienced experts who will report on current events in the credit insurance market. Matthias Beck, head of group insurance/risk management at Würth Group, a German multinational producer of fastening and assembly materials, and member of the GVNW’s board of directors, will moderate the event. Experts have warned of a wave of insolvencies in Germany since the support measures for German companies introduced during the height of Covid-19 were lifted, but it has not actually occurred yet. At the start of this week, the Federal Statistics Office published surprisingly positive figures. Based on the provisional data, the number of requests for normal business insolvency in Germany in September 2022 fell by 20.6% from August 2022. Their number had increased by 6.6% in August 2022 from July 2022. The office said, however, that it should be noted that such procedures will be included in the statistics only after the first decision has been taken by an insolvency court. The insolvency request itself was filed approximately three months earlier in many cases. It also pointed out that insolvency statistics include only business closures that occur in the course of insolvency proceedings. Business closures that are caused by other reasons or take place before businesses face acute financial difficulties are not included. The GVNW fears that the underlying problem could be a lot worse. “The number of corporate insolvencies in Germany has continued to decline, despite all forecasts that predicted a wave of insolvencies due to the end of the pandemic-related suspension of the obligation to file for insolvency. However, that can change – soaring energy prices, inflation, bottlenecks in the labour markets, supply chain collapses and restrictions as a result of the pandemic are new drivers of insolvency. How are credit insurers responding to these challenges?” said the association in its introduction to what should prove to be a lively and well-attended event. The federation of German industries, the BDI, certainly thinks there is a potential insolvency explosion looming in Germany if the government does not do more to help businesses with the energy crisis this winter. The massive relief package that the centre-left federal government of Social Democrats, Greens and the business-oriented Free Democrats announced earlier this month was aimed primarily at private households. German business groups such as the BDI feel that businesses have been left out in the cold and could face a very difficult winter. Siegfried Russwurm, president of the BDI, spoke of "considerable shortcomings and loopholes in the relief package", after it was announced. The BDI conducted a survey of industrial companies. It showed that 58% of the companies described the exploding energy costs as "a big challenge", and 34% said it was threatening their very existence. According to the BDI, almost one in ten companies in Germany has already cut back or even suspended production. As across Europe, SMEs are likely to struggle the most with the energy crisis this winter. German news service DW reported that skilled trades feel particularly vulnerable. “Every day, we receive emergency calls from businesses that are on the verge of shutting down production – partly because these enormous energy price increases can no longer be compensated for by price increases for the customers,” warned Hans Peter Wollseifer, president of the German Confederation of Skilled Crafts, in an interview with newspaper reporters. He warned that Germany may see more bankruptcies now than it did during the Covid-19 pandemic. Trade credit insurer Coface also recently published a report on the outlook for the German economy that does not make for easy reading. The sixth edition of Coface’s survey on corporate payment experience in Germany was conducted in July and August 2022, with 1,070 companies participating. Coface explained that this was the third edition taking place in the context of the Covid-19 pandemic, but the first to take into account the impact of the war in Ukraine and its effect on trade. “One of the main takeaways of this year’s survey is that payment behaviour has become slightly more restrictive: with a gas crisis on the horizon, fewer companies are offering payment terms (71%) compared to last year (74%). Businesses remain cautious and prefer to cash in as soon as possible. Accordingly, the preference for shorter credit-terms remained unchanged: more than half of the surveyed companies requested payments be made within 30 days, while ultra-long credit terms (120+ days) remained rare,” said Coface. The credit insurer said that its analysis of payment behaviour showed a very positive picture, but added that German companies have never been so pessimistic about their business outlook.. “While the view on the current situation this year is more or less neutral (23% of participants think their business situation is better than in 2021, while 22% see it as worse), the view for 2023 is very clear – 38% of companies surveyed are pessimistic regarding 2023, while only 14% are optimistic about their near future. The main reason for this is the significant amount of risks that companies are facing,” said Coface. Pre-existing risks, such as global production chain disruptions and rising non-energy commodity costs, remain the key concern for companies’ export outlook in 2022. However, new risks – including the war in Ukraine and related sanctions as well as rising energy prices – are also weighing on companies’ minds,” added the credit insurer. “With all these obstacles on the horizon, the question remains: how did German companies navigate the economic crisis caused by the pandemic, and in what shape are they entering the looming gas crisis? While 48% of participants had used public support over the last 12 months in 2021, this number was still 30% in 2022, with 25% even using state aid in the last three months before public support ended in June 2022. It is unclear if these companies will be able to continue without the support measures, which is especially true for companies using state-backed loans (31% of the participants who use support measures), as the loans require the start of repayments two years after their admissions,” added Coface.

GVNW announces credit risk event as energy fears rise among German firms

Want to read this article?

Read Next

Europe will ‘push ahead’ with climate policies amid US shift: Eiopa

MSIG expands political risk and trade credit capabilities in Asia

Lloyd’s approval for Africa Specialty Risks North Africa

France investigates TotalEnergies over liability for Mozambique terror attack

French firms still looking at Luxembourg for their captives

Europe will ‘push ahead’ with climate policies amid US shift: Eiopa

MSIG expands political risk and trade credit capabilities in Asia

Lloyd’s approval for Africa Specialty Risks North Africa

France investigates TotalEnergies over liability for Mozambique terror attack

French firms still looking at Luxembourg for their captives

Keep yourself informed

Sign up for Commercial Risk’s newsletters

Want to read this article?

Read Next

Europe will ‘push ahead’ with climate policies amid US shift: Eiopa

MSIG expands political risk and trade credit capabilities in Asia

Lloyd’s approval for Africa Specialty Risks North Africa

France investigates TotalEnergies over liability for Mozambique terror attack

French firms still looking at Luxembourg for their captives

Related Articles

Keep yourself informed

Sign up for Commercial Risk’s newsletters