The number of business claiming on their trade credit insurance over late payments has increased by 42% in the past year, according to the insurance trade body. The figures suggest that economic uncertainty and volatility still continue to affect smaller businesses, many of which are exposed to the risk of larger customers going bust amid continued economic uncertainty.
Trade credit insurance is principally used by companies to protect themselves against the risk that customers do not pay their debts or pay late. The Association of British Insurers’ (ABI) latest Trade Credit Insurance survey reveals that that 11,000 claims were made by businesses in 2015, an increase of 19% on the previous year.
The figures support recent research by Euler Hermes that put late payment levels at a two year high.
Uncertainty driving demand
Mark Shepherd, ABI General Insurance Policy Manager, said: “Economic uncertainty appears to be causing firms to claim on their insurance if one of their customers pays late, or not at all. Trade credit insurance provides vital support to help businesses trade with peace of mind. Last year, insurers paid out £149m to businesses owed money by their customers, allowing them to continue to operate in uncertain times.
“Trade credit insurance is crucial for all types of businesses, both large and small, and to the UK economy has a whole.”
In all, the ABI figures showed that there was £149m paid out to businesses under the terms of trade insurance policies, the equivalent of £3m a week. Those funds were principally to support them when a trading partner did not pay them money owed.
It also revealed that 74% of policies cover businesses trading domestically, with 22% of policies cover businesses exporting goods abroad, and that in 2015, more than 11,900 policies were sold by trade credit insurers.