Almost £150m in trade credit insurance claims were paid out to businesses for customer insolvency or late payment in 2015, 42% higher than the previous year. This was revealed by the Association of British Insurers (ABI), reflecting growing economic uncertainty.
The figures, similar to those from 2007, show that 11,000 claims were made by businesses in 2015, an increase of 19% on the previous year. Over 11,900 policies were sold by trade credit insurers in 2015.
The number of total company insolvencies is at its lowest since 1989, but it should be noted that UK businesses face risks such as economic volatility in numerous export markets, and low growth in vital sectors such as manufacturing, services, and construction.
Around £149m was paid out to businesses as cover for late or non-payment of their trading partners. This is equivalent to roughly £3m a week. Nearly three out of four of these policies covered companies that traded domestically (74%), while 22% covered those that exported goods.
It should be noted that the number of export policies rose by 22% in 2015. Companies of all sizes are beginning to recognise how trade credit insurance helps manage the financial risks that come with doing export business.
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.”