Non-payment trade credit insurance claims in UK hit highest level since 2009

Non-payment claims paid out in the UK by trade credit insurers in 2016 rose to their highest level since 2009, according to figures from the Association of British Insurers (ABI). Trade credit insurers paid £210m to UK businesses in claims due to non-payment, up just over 40% on 2015 and the equivalent of over £4m every week. The ABI said the payment of gross claims has fluctuated since 2007, with a peak in gross claims paid in 2009 at £286m, and the lowest figure recorded in 2014 at £105m. The number of claims notified also peaked in 2016, to its highest level since 2009 at 12,221 claims. The level of trade covered by trade credit insurance in the UK reached £314bn in 2016, up 6% from £295bn in 2015. The ABI noted that a fifth of policies last year covered businesses exporting goods or services overseas with just over three-quarters covering domestic trade. The vast majority of trade credit insurance is purchased through an intermediary, and last year was no different – 93% of gross written premiums were recorded as going through an intermediary and just 7% going direct. “This demonstrates the ongoing importance of the broker in getting the message on trade credit insurance out to the business community,” said the ABI. The UK government’s Insolvency Service reported earlier this year that an estimated total of 16,502 companies entered insolvency in 2016 in the UK, a rise of 12.6% on the year before. However, the Insolvency Service said this was primarily caused by 1,796 connected personal service companies entering liquidation on the same date following changes to claimable expenses rules. It said the underlying number of company insolvencies was broadly unchanged in 2016 compared with 2015. Trevor Williams, chair of the ABI Trade Credit Committee, and head of credit and surety - Europe, QBE Insurance, said: “In a climate of economic uncertainty, businesses are increasingly using trade credit insurance to protect themselves against the risk of non-payment. The fact that insured trade is at a record high is testament to the value businesses are increasingly placing on trade credit insurance, allowing them to trade with a safety net of protection against the evident as well as unexpected risks.” The ABI UK trade credit data report compiles data from nine trade credit insurers: AIG, Atradius, Coface, Euler Hermes, Markel International, QBE, Tokio Marine HCC, XL and Zurich. Alun Sweeney, country director for UK & Ireland at trade credit insurer Atradius, said: “The last year has been defined by uncertainty, driven largely by the result of the Brexit referendum which has left a huge question mark over the future of EU trade relationships. In a time of uncertainty, the focus on risk becomes more acute, particularly the prospect of new risks which are difficult for any trading business to predict.” He continued: “Trade credit insurance acts as a buffer to the risks of trading so should a business be impacted by non-payment, a claim can be made to mitigate prospective losses. However, the added value of trade credit insurance is the information and guidance available, enabling insureds to enter a trade deal from an informed position. Trade credit insurers provide expert insight, analysis and advice on the likelihood of non-payment so a business knows whether to trade with a customer in the first place. Insurers can also warn of wider economic, political and financial risk as well as help identify new opportunities to trade which can be a major boost to a business’ growth strategy.”

Non-payment trade credit insurance claims in UK hit highest level since 2009

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