Credit insurers warned that small businesses need trade cover.
The Federation of Small Businesses (FSB) has urged credit insurers to back small businesses, warning that a reduction in trade cover would create huge problems for the real economy and could “lead to more bankruptcies”.
Last week, Coface withdrew credit insurance cover from JJB Sports.
The sporting goods retailer could now face demands from suppliers for payment upfront. Other suppliers may even refuse to provide goods.
Meanwhile, Fitch Ratings has urged caution on the credit insurance industry, amid concerns that the recent turmoil in the banking sector could lead
to rising corporate bankruptcies, in turn affecting credit insurers’ underwriting performance.
An FSB spokesman said: “We would urge the insurance industry to hold the line and not withdraw cover. These are testing times but hopefully there will be an interest rate cut in the run-up to Christmas and we should see an increase in consumer spending.”
According to Fitch’s credit insurance report, Atradius, Coface and Euler Hermes together control more than 90% of the global credit insurance market.
Fitch’s report said credit insurers had managed to post positive technical results despite deterioration in underwriting performance.
This was down to the short timeframe of the business underwritten by credit insurers, together with the prompt application of different risk measures to limit the effect of the financial crisis on their results, the report said.
The measures included the reduction of the risk position on selected debtors, tariff adjustments, change in terms and conditions and cancellation of policies in extreme situations.
Coface refused to comment on its withdrawal of cover for JJB Sports.