Hardening rates to boost trade credit market

Hardening rates to boost trade credit market | Insurance Business

Hardening rates to boost trade credit market

The trade credit market is seeing hardening rates, which could be good news for brokers.

With headline grabbing insolvencies of major Australian businesses such as Marcs and Dick Smith over the last year, trade credit cover is more important to clients now than ever and Mark Hoppe, managing director of the Australian branch of Atradius, said the market will keep improving.

“The market hardened in the backend of last year and I think that it will continue to do so,” Hoppe told Insurance Business.

“We will still see things harden but bearing in mind that it is hardening from a very soft place. Last year, whilst we did increase rates, the rates that were offered in 2016 were still lower than were being offered in 2014.”

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Whilst the market may not return to its highs during the global financial crisis, trade credit is another market expected to make gains as hardening continues in 2017.

Kirk Cheesman, managing director of NCI, said that he expects “some stabilisation” in the trade credit market over the course of 2017 as claims look set to continue.

“Our other indicators, like overdue payment reports and collections actions, seem to anticipate there are still further insolvencies to come,” Cheesman told Insurance Business.

For brokers, Cheesman advised discussing with clients what the impact of their largest client failing to pay would have on their business as a way to broach the affordable yet necessary cover.

Both 2015 and 2016 saw an increase in claims in the trade credit market and payouts in these instances help to demonstrate the benefits that a trade credit policy can present to a business.

For Hoppe, he expects 2017 to be “one of the more uncertain years” that he has ever seen. In 2015, issues in the mining sector were clear and their flow on effects impacted the trade credit market in 2016.

“There are some positive signs. Things in mining seem to have picked up a little bit, but there are also some negative signs in regards to trade agreements, and uncertainty in the world,” he explained.

“It really is more of an uncertain environment than ever and uncertainty is when you want to be insured.”

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