Higher credit insurance premiums are here to stay
“The premiums that were available on the market were too low, and as we saw, did not accurately reflect the risk that insurers were taking on,” Coface UK & Ireland credit insurance director Ian Hollyhomes told FoodManufacture.co.uk.
However, the availability of credit insurance was improving, he claimed. “At Coface, we are now looking to reinstate cover in those instances where it was reviewed or cancelled, but there has been a hardening of rates as we are looking to ensure that premiums reflect the risks we are taking.”
Coface had also revised its credit insurance model in order to provide more transparency for customers, he said. “We’ve launched a new service to help businesses update and improve the accuracy of their credit ratings by supplying up-to-date financial accounts.”
Historically, Coface had relied heavily on accounts filed at Companies House, which were frequently out-of-date, when assessing a firm’s financial viability, he said. “More up-to-date accounts help us provide a more fair and accurate assessment of risk.”
Trade credit insurance claims
According to figures published last month, trade credit insurance claims have dropped steadily over the past year from a peak in early 2009.
However, accessing insurance is still difficult and expensive for many food manufacturers, Food and Drink Federation director, member services, Charlotte Lawson, told FoodManufacture.co.uk last month.
“If you can’t get insurance to cover your trading relationships, banks are reluctant to give you money unless you can guarantee payment on delivery from your customers.”
The trade credit insurance ‘top-up’ scheme that the government introduced last year to help firms access credit insurance had not been taken up very widely, partly because it was so complicated, said Lawson.
Moreover, the scheme, which provided ‘top-up’ cover for UK businesses that had had credit insurance limits reduced, did not apply to exports.