Chief exec denies credit insurers left industry short of capacity in 2009
French credit insurer Coface is expecting a positive result in the UK and Ireland in 2010 after a challenging 2009 and a Q1 2010 loss, according to the division’s managing director Xavier Denecker.
Coface’s credit insurance business made an operating profit of €13m (£11.3m) groupwide in Q1 2010, compared with an operating loss of €90m in the same period of 2009. Total group operating profit for Q1 2010 was €24m, versus a Q1 2009 loss of €76m, and consolidated net profit was €15m compared with a loss of €37m.
The firm attributed the improved insurance result to falling claims: its claims to premium ratio fell to 63% from 98% in 2009. Coface said that the improving claims environment had resulted in good performance in all subscription zones except the UK, which was hit by “a substantial potential loss concerning bankruptcy caused by fraud”.
Despite the potential Q1 loss for the UK, Denecker said the underlying trend is positive, and he expects a profit from his division for the full 2010 year. “The improvement in claims experience in the UK is practically the same as for the Coface group as a whole. The Q1 result is not negative because of a trend, but because of the notification of one significant amount.”
Credit insurers were criticised for removing capacity from the market in 2009. Denecker acknowledges that his firm cut credit limits, but denied that the industry was short of capacity, saying coverage was the only variable element of the policies and cutting back was the one way insurers could adjust for the growing risk in their portfolios.
Denecker said Coface is assessing rates on a case-by-case basis. “If we have a policyholder that has had heavy losses in the past year, then we will need an increase in premium. If the situation of our policyholder is good and its prospects are positive, then we will have some flexibility on premium rates – but we will not return them to pre-crisis levels.”