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Reduced lodgement of credit insurance claims has provided the market with some “welcome relief,” an expert has said.
Kirk Cheesman, managing director of NCI, said that the firm has seen claims drop over recent months. In its latest trade credit risk index, the score for the fourth quarter of 2017 dropped 11% to 729 – the lowest number since the beginning of 2016 thanks to a drop in claims numbers.
However, Cheesman noted that the beginning of the year could spell more trouble in the market.
“Overdue collection activity is still high and typically we experience more insolvencies in Q1 of a calendar year,” Cheesman told Insurance Business. “So I would expect a minor jump [based on history].”
Cheesman noted that 2017 was notable for its lack of “impact” insolvencies, such as those of Dick Smith and OneSteel in 2016 both of which had a major impact on the market. According to NCI research, in the final quarter of the year, there were 324 paid claims, with a value of $12.1 million. Insolvencies in the quarter were headlined by fashion brands Oroton and Marcs/David Lawrence, and Cheesman said that the retail industry remains one for brokers to keep an eye on.
“Retail and construction are still the industries to watch,” Cheesman said. “The changes in purchasing behaviours for retail and the work fluctuations in construction can place pressures on revenue and cash flow.”
Over the year, NCI found that building and hardware saw the biggest reduction in claims rates while manufacturing saw the biggest jump, which provides brokers with an opportunity to help their clients.
“Manufacturing has always been an industry which looks to smooth trade credit risk with credit insurance,” Cheesman continued. “Given insolvencies occur regularly in this sector, credit insurance is a product businesses and brokers should be discussing.”
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