As firms look to grow they will over-stretch themselves financially

Trade credit insurance claims will rise in Europe, the Middle East and Africa (EMEA) throughout 2014, with claims expected to peak within the next 12-18 months, according to Marsh.

The broker’s latest EMEA trade credit quarterly briefing said as more firms overstretch themselves financially in a bid to capitalise on economic growth, they are likely to experience cash flow restrictions.

Trade credit insurance provides cover to companies that wish to protect themselves from loss due to credit risks, such a protracted default, insolvency or bankruptcy.

During the first quarter of this year, the EMEA countries experienced increased claim levels, following a continuous decline in the last three quarters of 2013.

In Western Europe, while cover levels are increasing in the majority of countries, there are still some trade sectors where cover is more restrictive, including paper, pulp, construction and electronics.

Meanwhile, in the rest of Europe, insurers are adopting a more cautious approach to cover levels in Eastern Europe, due in part to political uncertainties and the insolvency outlook.

Marsh International trade credit practice managing director Tim Smith said although insurers are currently providing higher levels of trade credit cover for less premium, he expected the rise in claims could lead to an increase in rates in 2015.

“Both economy conditions and business confidence are improving across the EMEA region. However, despite these positive indicators, past experiences tell us that some businesses will financially over-stretch themselves in the period following a recession as they look to grow,” Smith added.