Companies see Credit insurance removed

Companies see Credit insurance removed

Wed 4th Mar 2009

Corus has become the first leading UK industrial company to find itself caught by the reduction of cover to its suppliers by one of the world’s largest credit insurers.

Euler Hermes said it was reducing the amount of cover it was willing to write for suppliers of the country’s largest steelmaker as a result of a fall in global demand for steel. This cover is written against the risk of Corus not paying its bills.

Euler Hermes said: “We have reduced our exposure following the well-documented reduction in needs due to reduced activity levels and a collapse in prices. This has been happening across the whole sector.”

It is understood the insurer is also concerned about a lack of transparency from Corus and a reluctance from the company to share its most recent trading positions with its suppliers.

However, Corus denied there were communication problems between the two companies. “We have regular meetings with all the credit insurers and they are fully up to date with our business.”

Corus also insisted it had not seen any problems as a result of the reduction in cover to its suppliers, but said it was due to meet Euler Hermes on Wednesday to discuss the issue, among others.

The situation is further complicated by the fact that Corus purchases its own credit insurance from Euler Hermes for supplies it makes to other companies.

Dave Brassey  from the South Wales Chambers of Commerce (also a Director of Underwood Insurance Services) warned that the insurer’s position would mean that some suppliers may have to trade uninsured. “Many small suppliers rely almost solely on Corus for their business, so if they cannot find the insurance they need, they will have no choice but to trade without insurance,” he said.

The apparent communication problem between Corus and the insurer is another example of a more general breakdown between leading UK companies and their suppliers’ credit insurers. The situation has become so bad that the Bank of England was recently forced to step in and persuade companies to provide full transparency.

This is the first time a leading British industrial company has been hit by the turmoil in the credit insurance sector, which has already seen large amounts of cover reduced or withdrawn from companies in retail and construction.

 



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