Insolvency numbers in the United Kingdom (U.K.) were recorded just shy of 17,250 in 2017, reaching the highest levels in the past four years. According to the Association of British Insurers (ABI), this 4.2% rise from 2016 should make trade credit insurance that much more appealing to businesses, insurers and brokers.
In an Insurance Times article on Jan. 29, ABI Assistant Director, Head of Property, Commercial and Specialist Lines Mark Shepherd said that in the U.K., there were more than 300 business insolvencies every week in 2017. Insolvencies in 2016 reached about 16,550, while there were approximately 17,680 insolvencies in 2013.
“One insolvency can risk a domino effect to hundreds of firms in the supply chain,” Shepherd said in the article; an occurrence, for example, that is clearly demonstrated in the wake of Carillion construction’s liquidation in the U.K.
2018 was barely underway before Carillion collapsed, creating a ripple effect in the European engineering and construction sector. Although trade credit insurers are expected to pay impacted firms about 31 million pounds, news reports concluded that significant losses will still weigh on suppliers and contractors.
A “second wave” of insolvencies is imminent in this case, added Credit Risk Solution’s Mike Clark, also the chair of Biba’s Trade Risk Focus Group. However, all hope isn’t lost as other major contractors swoop in to help prevent further losses, he said. But if credit insurance wasn’t on your mind before, it should be now.
“Those companies who invested in cover had access to industry specialists who offered guidance on the credit risks involved in selling goods and services to Carillion,” Clark told Insurance Times. “Significant claims will be paid, but many suppliers took heed and managed exposures accordingly.”
—Andrew Michaels, editorial associate