201504 CM April

In 2013 there were 10,544 credit
insurance claims totalling £171million ...
– THE ASSOCIATION OF BRITISH INSURERS.
demise could have been predicted. But
the collapse of Phones4U came like a bolt
out of the blue: “The company still had
significant levels of cash on the balance
sheet when it failed,” he says. “Yes it is
true that contracts had not been renewed,
but there was a long run-off period and
therefore plenty of opportunity for the
directors to either re-negotiate those
contracts or devise a new strategy. They
had a huge store portfolio and so many
options available to them, but it was
as if they simply threw in the towel and
accepted defeat. We certainly could not
have foreseen that style of management.”
Marc is understandably disappointed
that Phones4U did not appear to have
a ‘B’ Plan. His disappointment is even
more understandable given the losses
that Atradius suffered as a result: it had
to pay out the largest value of claims in
the company’s history of operating in
the UK. On the positive side, however,
he is content that several major UK firms
were protected, and that the value of
credit insurance, and the importance
of Retention of Title (RoT), was
demonstrated.
The major failures of recent times
have undoubtedly resulted in a change
in the claims landscape: Euler Hermes,
for example, has seen the volume of
claims fall, but the value of each claim
rise significantly, a trend which it says
started in 2013. Despite this, credit
exposures are growing, and acceptance
rates increasing. Coface too has seen the
frequency of claims fall, reaching its nadir
in the third quarter of last year. Atradius
has similarly experienced a fall in volumes
overall, but also a marked rise in claims in
certain sectors, notably construction, and
most recently, food production.
Gerard still has concerns that the
credit insurance industry as a whole is
not growing, as premium rates are not
developing as they should: “While our
exposure goes up, the total £-premium
available has remained flat, at best, which
means that the industry is heading in the
wrong direction,” he says.
That’s not to say that Euler Hermes
isn’t trying new things. Two years
ago it opened a new ‘channel’, working
through the banks (and specifically
HSBC), and yet still the overall
number of policyholders remains a
challenge. In terms of product innovation,
Euler Hermes’ Simplicity product,
launched specifically to address the
SME market, is finding a willing audience
and introducing a new generation of
businesses to the purpose and value of
credit insurance. Demand for its ‘top up’
product – CAP – is also on the rise, and
yet another positive sign of business
growth.
Frédéric tells a similar story. Premium
rates, he says, are at best flat or reducing,
but that consistent pricing and coverage
remains paramount: “No-one wants to
go back to the time five years ago when
coverage was being slashed across the
board,” he says, “and no-one wants
to be forced into taking action that is
to the detriment of our customer base.
Rates have to be at a sustainable level
to provide the level of cover our clients
need.”
Coface has similarly seen its SME
book grow and expects that it will
grow further: “It is probably where the
opportunity for credit insurance is the
greatest,” he says. In the ‘core’ market,
sometimes referred to as the ‘national’
segment (i.e. firms of between £10 million
to £100 million turnover), Frédéric has
greater concerns. Accounts have tended
to ‘churn’, and features such as noncancellable
limits and extended grace
periods that are more usually associated
with multi-national contracts have started
creeping into the national space: “These
are good for the customer if the promises
are fulfilled,” he says, “but what happens
in a crisis we will have to see.”
Topliner, Coface’s ‘top up’ product
is proving popular, with steady monthly
volumes: “Customers like to have
choice,” he says, “and are happy to
adjust levels of cover at particular times
when they need it most. There is much
greater flexibility in the cover available
than there was two or three years ago.”
Marc agrees with Gerard and
Frederic that competition within the
credit insurance industry is increasing:
“Price pressures are on a downward
spiral, which is great news for our clients
and prospects, but not great news for
insurers,” he says. He sees competition
within the broker arena also on the
increase: “Brokers are getting stronger
and there is more competition,” he
explains. “Many new brokerages have
been launched in recent years, attracting
individuals who have either worked for a
larger broker, or come out of university
with an entrepreneurial flair, are ex-credit
insurers or bankers and are wellmotivated,
well-trained, and making a real
impact. We find that there are now three
or four brokers hunting each piece of new
business.”
Despite the competition, Marc
is pleased with the traction that a
new Atradius Single Situation Cover
product is having, and encouraged
that it is attracting new entrants to the
market almost on a ‘try before you buy’
approach. Atradius is also building on
its heritage with a new Export policy for
businesses that are new to international
trade and that need a helping hand. It also
has its own ‘top up’ product, but its plan
for 2015 is to work with its clients more
closely within an existing whole turnover
policy to provide the level of cover they
require.
And as to the future? Nobody seems
keen to rule out major failures in the
future. Indeed quite the opposite: “We are
in a period of ‘volatile volatility’, to coin a
phrase from a leading investment bank,
during which the unexpected should
become the expected, and to occur more
often,” Frédéric concludes.
TRADE CREDIT INSURANCE PART ONE
The recognised standard in credit management
www.cicm.com April 2015 23