Atradius updates on corporate insolvencies

Atradius updates on corporate insolvencies | Insurance Business

Atradius updates on corporate insolvencies
The Australian economy is generally stable compared to other economies in the region and around the world. However, certain sectors in the local market are facing a worsening insolvency landscape, according to credit insurer Atradius.

ASIC's quarterly insolvency statistics for the quarter ending June 2017 showed that the number of Australian companies entering into external administration rose by 28% from the previous quarter to 2,198. On a slightly positive side, the quarterly total was down by 3.7% compared to the same quarter last year.

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The sectors that had the most insolvencies so far this year were construction, with 403 in the June quarter alone, followed by the accommodation and food sector, at 227 insolvencies, compared to last year's 316.

In a statement, Atradius said the rising insolvencies in the Australian economy are reflected in the claims being paid out by credit insurers, with the construction sector accounting for 50% of overall credit insurance claims paid last year as well as year to date. Insolvencies also accounted for roughly 75% of overall credit insurance claims paid – a slight decrease from last year's 79% but likely to increase next year based on the corporate insolvencies being seen in the country.

“For some time now we have seen the construction and food and accommodation sector’s insolvency rate increasing,” said Mary Ibrahim, head of client services at Atradius. “For agriculture and food, this may in part be due to increased competition and changing consumer spending habits but for construction it is an ongoing trend. Insolvencies are also affecting the retail sector, which experienced 155 insolvencies. This affected many high-profile brands such as Topshop, Herringbone, and David Lawrence. It will be interesting to see what the sector does in the coming six months, particularly with the entry of Amazon into our market.”

Meanwhile, the transport, portal, and warehousing sector posted 95 insolvencies; manufacturing, 65; information, media, and telecommunications, 61; education and training, 50; electricity, gas, water, and waste services, 47; and rental, hiring, and real estate services, 39.

State-wise, New South Wales had the most insolvencies at 714, followed by Victoria, with 649; Queensland, 374; and Western Australia, 309. The rest of the states had a relatively smaller number of insolvencies – 81 in South Australia, 39 in Australian Capital Territory, and 12 in Tasmania.

All states posted an increase in insolvencies from the previous quarter – a marked contrast to the same quarter last year, when most states saw a decline in insolvencies, Atradius said.

“It’s important for business decision-makers to stay up-to-date on insolvencies and at-risk sectors so they can make smarter decisions when it comes to extending trade credit to certain organisations,” Ibrahim said. “This is a key part of due diligence. Companies can also protect their interests by taking out trade credit insurance, which is an affordable and reliable way to protect the organisation in the event a customer fails to pay.”

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