Associate director at credit insurance broker Acumen says that insurers are likely to see large claims and warns of a “domino” effect over the coming months

Credit insurers and surety underwriters will feel a “significant impact” from the liquidation of Carillion, according to a senior credit insurance broker.

The construction giant plunged into liquidation last Monday. In addition to its construction work, it held contracts for a range of wider support services, including Direct Line Group’s facilities management. Direct Line Group has confirmed that it has “contingency plans” in place.

Now, a credit insurance broking boss has revealed that insurers may feel the heat where suppliers were legally bound by contracts.

Acumen Credit Insurance associate director, Simon Martin told Insurance Times: “Whilst insurers were warning policyholders of the significant problems with the group and not covering new contracts for some time, there will undoubtedly be large claims made where suppliers were legally bound to continue with contracts.”

It is too early to put a figure on the potential losses, but Martin suspects they will be in the “hundreds of millions”.

Martin also flagged up the possibility that smaller claims will also be seen.

He continued: “Potentially, there may also be many smaller claims where companies were justifying their own credit limits under agreed Discretionary Limits.”

Warning of a “domino” effect, Martin suggested that the worst impact may be yet to come, and it will be a country-wide problem. Yesterday, the ECIC warned regional brokers that many of their customers could be facing financial difficulties as a result of the collapse.

Martin concluded: “Potentially the biggest impact may be over the coming months where uninsured suppliers struggle with the impact of not being paid by Carillion. This “domino” effect is well known in construction and has been experienced before when main contractors fail if only in more localised incidences. This promises to be much larger and across the whole country.”