201504 CM April

EXPECTING THE
UNEXPECTED
Sean Feast seeks the views of some of the major players in the
credit insurance industry in the wake of recent business failures.
TRADE CREDIT INSURANCE PART ONE
THE sudden and dramatic collapse
of Phones4U in September last
year sent shockwaves through
the credit insurance industry. The
immediate blame for the company’s
failure was set at the feet of the country’s
biggest mobile phone operator, EE, owner
of the Orange and T-Mobile brands, and
its decision not to renew a contract to sell
its products in Phones4U shops. It was
a hammer blow that followed a similar
decision by Vodafone and two other
operators, O2 and Three. David Kassler,
the Chief Executive of Phones4U said
simply: “If the mobile network operators
decline to supply us, we do not have
a business.” Despite revenues of £1
billion, the business was obliged to enter
into administration.
Sadly, Phones4U was not the only
sudden failure last year that impacted the
insurance world. City Link, the parcels
delivery business, threw in the towel on
New Year’s Eve, placing close to 4,000
jobs in jeopardy; while on the international
stage, OW Bunker, Denmark’s third
largest firm, entered into bankruptcy amid
accusations of fraud in its Singaporebased
subsidiary. A joint statement from
Denmark’s pension funds described the
collapse as: “Significant, extraordinary
and highly negative.”
Such failures, whilst costing the
credit insurance industry millions of
pounds in claims, ironically serve to
support one of the product’s key selling
points – protecting suppliers against the
unexpected failure of one of their larger
customers. They have also resulted
in a shift in attitude to underwriting,
according to Gerard van Kaathoven,
Chief Executive of Euler Hermes for the
UK and Ireland: “Whereas we used to be
happy to underwrite the subsidiaries of a
strong parent company, this is no longer
guaranteed,” he explains. Gerard says
this is especially true of High Street retail:
“We no longer assume that a parent will
step in to support a failing subsidiary,”
he continues. “They seem more prepared
now to let them fail.”
CONTINUES OVERLEAF
The recognised standard in credit management
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