Caroline Davies, Tokio Marine HCC provides an insight into why businesses need to review how they are protecting their businesses.
“Uncertainty” is a word we are all reading a lot lately in the financial and business press. Which is unsurprising, when you look at the reasons why. Who could have foreseen the impact a single TV series would have on the plastics industry? Or how consumers would turn against diesel engines after the Volkswagen scandal? Not to mention what’s currently happening up and down the high street with the Landlords CVA seemingly the latest “must have” product. The knock-on effects of these issues will be felt across a wide range of sectors, as time goes on.
Credit insurance is something that a lot of businesses don’t realise could protect them against failure or loss. You might not have been dealing with Carillion, Palmer & Harvey or Toys R Us, but what if your customer was and they didn’t get paid? If their loss sends them under and they don’t pay you, we call that the “domino effect”. Your client base may look “blue chip”, but if you don’t know who their customers are, you can never be certain that you will avoid incurring a loss. The increasing uncertain environment means that credit insurance is playing an increasingly important role in a company’s risk management programme.
As one of the UK’s major credit insurers, Tokio Marine HCC employs sector-specific Specialist Risk Underwriters to analyse and monitor all of our clients’ key customers. One of the main objectives of any credit insurer is to try and see the failures coming and to steer our policyholders away wherever possible. Of course, primarily the cover is there to fill the gap in the balance sheet that is left by a bad debt, but another key benefit is the market intelligence policyholders receive from their Risk Underwriter. This information cannot be obtained from a status report or company accounts, however up to date and may mean the difference between incurring and avoiding a bad debt.
With wages in excess of inflation and the Retail Price Index down in March, there is every chance we will see a further rise in interest rates in the coming months. This will doubtless apply further pressure to any already stressed balance sheet and insolvency figures will continue to rise.