Trade credit insurers pay £4 million a week to UK businesses

The ABI’s annual trade credit insurance statistics highlight that:

• Total claims paid to businesses due to non-payment in 2016 was £210 million, the equivalent of over £4 million a week. This is up just over 40% on 2015, and the highest amount since 2009. Payment of gross claims has fluctuated since 2007, with a peak in gross claims paid in 2009 at £286m, and the lowest figure recorded in 2014 at £105m.
• The number of claims notified also peaked in 2016, to its highest level since 2009 at 12,221 claims
• The level of trade covered by trade credit insurance in the UK has reached £314 billion, up 6% on £295 billion in 2015.
• A fifth of policies last year covered businesses exporting goods or services overseas with just over three-quarters covering domestic trade.
• The share of gross written premiums by distribution channel has remained fairly constant with 93% recorded as going through an intermediary and 7% going direct in 2016. This demonstrates the ongoing importance of the broker in getting the message on trade credit insurance out to the business community.

With total company insolvencies in the UK rising by 12.6% ^.from 2015, UK businesses continue to face risks with economic volatility in many export markets, alongside subdued UK growth across the manufacturing, construction and services sector. Accordingly, the trade credit insurance market continues to grow with almost 12,000 policies in force, as more businesses look to protect themselves against insolvency or protracted debt.

Commenting on the figures, Trevor Williams, Chair of the ABI Trade Credit Committee, and Head of Credit and Surety – Europe, QBE Insurance, said “Trade credit insurance is an essential tool in enabling businesses to trade safely, both domestically and overseas. Without being able to claim for non-payment, UK businesses would have lost out to the tune of £4m a week – a significant figure which would have been a direct hit on their bottom line. Businesses, in particular SMEs, are unable to bear the brunt of non-payment which can have a detrimental impact on their financial health and can also have a negative knock-on effect rippling down the supply chain.

“In a climate of economic uncertainty, businesses are increasingly using trade credit insurance to protect themselves against the risk of non-payment. The fact that insured trade is at a record high is testament to the value businesses are increasingly placing on trade credit insurance, allowing them to trade with a safety net of protection against the evident as well as unexpected risks.”

The ABI UK Trade Credit Data Report compiles data from nine trade credit insurers; AIG, Atradius, Coface, Euler Hermes, Markel International, QBE, Tokio Marine HCC, XL and Zurich.