It’s fair to say that insurance companies don’t always get the best press with most newspapers filled with doom and gloom about how the ‘big bad insurer’ denied an unfortunate customer a pay-out. Now, however, an insurance company has actually been accredited with coming to the rescue of a British firm.
The firm in the spotlight is trade credit insurer Atradius, which paid out £55,000 to help keep Leicester-based Softex International Limited afloat.
Softex is a textile firm that imports yarn for knitting, with final products ending up with such renowned fashion retailers as Laura Ashley, New Look, John Lewis, M&S, Burberry and Debenhams. In November last year, however, it teetered close to financial turmoil when one of its customers – a fashion manufacturer – slipped into administration.
“The administration was unexpected,” said Kiran Yarashi, managing director of Softex. “It was a long-standing customer with a reported turnover of £15 million and there were no signs that it was about to go under. The loss would have left a big hole in our finances and we couldn’t have continued operating without the claims payout.”
Atradius reached out to Insurance Business UK
to retell the story in the hope of stressing the importance of trade credit insurance as part of the package that brokers offer to their clients. It states that the Softex experience is proof that businesses can never assume they are safe from the risks of insolvency – and suggested that there would be little improvement in the environment in 2016 with pre-Brexit forecasts indicating that insolvency levels in England & Wales were expected to hit 12,725 by the end of the year.
“The economy grew 0.6% in the three-month period to the end of June,” said Tanya Giles, regional manager at Atradius. “However, as we review the impact of the weeks following the referendum we need to bear in mind that the effects of the recession continue to cast a shadow with business insolvencies still running at troubling levels. Businesses can be significantly impacted when they do not get paid. Insolvencies are brutal and leave a trail of destruction along the supply chain. Small businesses are particularly at risk as they may not be able to sustain the financial impact of unpaid invoices, nor indeed the loss of a customer from their book.
“However, while some insolvencies may be a shock, there will often be tell-tale signs of an impending failure. The warning signs include customers failing to pay on time, permanently taking advantage of full credit lines asking to prolong overdue bills, changing banks or offering bills of exchange in lieu of payment.
“The biggest single thing a business can do to mitigate the risks of non-payment is to protect themselves. Trade credit insurance provides simple, cost effective protection.”
It believes that this is one form of insurance that can actually make the insurer and the insurance broker, the hero of the story and no longer the villain.
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£36m trade credit claims paid to small businesses in 2015