Crunch means boom for credit insurance as premiums rise
08-08-2008
Most business sectors are seeing turnover fall because of the credit crunch, but credit insurance is not one of them.
Manchester insurance brokers say they are handling more business than six months ago. Premiums are rising as well.
Andrew Rowley, strategic director in Bridge Insurance Brokers' credit risk division, said rising company failures in the second quarter had sent suppliers literally scurrying for cover.
Construction company failures were up 20 per cent and 16 per cent more retailers went under, according to national figures from Equifax.
Rowley said: “Quite a few of the enquiries we are getting now are from companies that haven't previously insured. We're one of the industries that benefits from everybody else's doom and gloom.”
One of his clients, a footwear wholesaler, took out new insurance early in the year after a period without cover. It was just as well — its customers included Stead & Simpson, Dolcis and Ethel Austin, all of whom failed.
Rowley said the major underwriters — Euler Hermes, Atradius and Coface — had raised premiums by between 5 and 10 per cent in response to the rising demand for cover.
Claims on the rise
By Crain's Staff Reporter
Paul Martin, managing director of Sale-based insurance broker John Reynolds Group, said underwriters had seen a sharp rise in the number and value of claims so far this year.
“In the last three months it has got more difficult to obtain credit insurance in certain sectors. The losses for some underwriters have increased in some cases quite dramatically,” he said.
“That is down to the credit crunch in essence. The underwriters are looking very, very closely at certain sectors and to be fair you can't blame them. You can still get insurance but the insurers are being more vigilant and it takes a few days longer to get a decision from them.
“In some sectors they are asking to see management accounts up to May 08 when previously they would have been happy with the accounts for the last calendar year. I can't ever remember some of the underwriters being so cautious about certain sectors and I have been in the business for 17 years.”
Martin identified haulage, construction and furniture retail as sectors where underwriters now take a radically different view compared to three months ago.
Reynolds specialises in trade finance and has annual gross written premiums of £13m. Its business has benefited from the rise in fuel prices because some of its largest customers are in the oil business.
Rowley estimated that Manchester-based brokers, including local offices of Marsh and Aon, handle around £30m of credit insurance every year. Bridge Insurance's annual gross written premiums on credit insurance are around £3m.
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