06 May 2018

Financial Times: Brexit and bankruptcies to raise UK trade credit insurance prices

Brexit and a string of bankruptcies are driving up the cost of UK companies protecting against their customers going out of business, the head of the world’s largest credit insurer has said.

Trade credit insurance protects companies against the risk that their customers go bust before paying up for goods or services. More than £340bn of UK trade is being covered by trade credit policies, according to the Association of British Insurers.

The price of this protection is likely to rise in the UK, said Wilfried Verstraete, chief executive of Euler Hermes, who said that his company needed to react to changing conditions.

“On average we are targeting a 5 per cent increase in pricing because of the impact of Brexit and pressure on retail, which has been exacerbated by Brexit,” he said.

He added: “We have not reduced our exposure or our risk appetite in the UK, but we have become more careful.”

On the UK’s exit from the EU, Mr Verstraete said: “Our base case is a reasoned Brexit not a hard Brexit” but added that he was planning for the economic consequences. “A rise in import prices starts to hurt margins. It is not a negligible impact.”

Richard Talboys, executive director of the trade credit division at insurance broker Willis Towers Watson, said prices for trade credit insurance in the UK have been falling for years. “Up to now [the insurers] have been fighting each other like crazy and cutting prices,” he said. “Capital is still there but people are being more careful. Insurers are telling me that prices have to bottom out.”

Full article on Financial Times (subscription required)

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