“It’s not just businesses that look financially weak that fail.” That observation from Sam Ashdown (pictured), head of underwriting for light industries and services at Coface UK, captures an ongoing shift many brokers and underwriters are continuing to grapple with.
The traditional visual cues of credit strength – longevity, steady margins, consistent accounts – are proving less predictive than they once were for those without the insight of a credit insurance risk underwriter.
Some firms suffer “a short, sharp shock to the system that they can't cope with,” Ashdown said. Others decide “it's not worth slogging away anymore to make very little money.” In such cases, “they're good, until they're not.”
The mechanics of underwriting have not changed. But the comfort historically drawn from financial strength has weakened.
Ashdown traced the shift to the broader operating climate. “For me, in short, the pace of global events is certainly one of the main contributing factors,” he said. “Second to that, connected to it, is the relentlessness of uncertainty, as I would call it.”
In that environment, even contained regulatory or cost changes can alter payment behaviour. Businesses operating with limited headroom may slow payments or conserve liquidity as a defensive measure. On paper, performance can still appear adequate. In practice, flexibility is thinner.
That pressure has forced a reset in underwriting thresholds. “The thresholds where we were comfortable with a business – were perhaps a lot higher than they are now, because businesses, generally speaking, are just performing on average worse,” Ashdown said. “We're adjusting that mentality all the time to what is the new normal for businesses in a certain sector.”
In sectors such as hospitality, he added, “what we consider a fine margin has to be adjusted to the world they're operating in.” Financial ratios are no longer assessed in isolation. “When we look at it in the financial context, we then add in: what are the external stresses to that business, and what could be the external stresses?” Where those pressures are elevated, “the flexibility that business has is perhaps less than others.”
Strong balance sheets still matter. But resilience is now defined as much by exposure and adaptability as by margin alone.
If thresholds have shifted, timeliness has become equally critical. In the UK, much of the data underpinning credit decisions comes from statutory filings. “In the UK the backbone of that is information filed at Companies House,” Ashdown said.
With filing windows stretching up to nine or 12 months, statutory accounts can struggle to reflect fast-changing trading conditions. In certain sectors, they may be “already too old by the time we get them… to be overly useful for making an up-to-date decision.”
That lag has reshaped underwriting practice. Management accounts and recent trading data now carry greater weight, particularly for non-listed businesses exposed to cost shocks or regulatory change. It also highlights the limits of standard credit checks, which often rely on public-domain information that cannot capture emerging stress in real time.
Insurers, by contrast, continue to see earlier signals through policy reporting. Payment slowdowns disclosed under policy terms provide intelligence that “is not in the public domain but has a much more live impact on our decision-making,” Ashdown said. For brokers advising clients, that distinction can be significant.
Credit risk models have adapted to volatility. “Especially these days, where algorithm models have developed and it's not just humans making decisions on their own, they evolve very quickly to volatility,” Ashdown said. “As the data changes, the models react to that.”
Yet faster data does not remove the need for interpretation. A deterioration in payment behaviour, for example, may not automatically signal distress. “It slowing down in and of itself might not be a problem; we have to understand why that's the case,” he said.
Underwriting, he stressed, remains grounded in individual assessment. “The way in which insurance underwriters operate is almost universally to look at businesses on a standalone, case-by-case basis.” Sector context matters, but decisions ultimately turn on how a specific business performs within it.
Prolonged turbulence can also create a filtering effect. “The businesses that can't make it through that turbulence haven't made it through,” Ashdown said. In some subsectors, that temporarily strengthens the average profile of survivors. But sustained pressure eventually tests even resilient operators, and “the cycle repeats itself.”
For brokers and policyholders, the implication is straightforward. “Making a one-off or once-annual credit assessment of their ledger, most businesses probably understand now that is not sufficient to control their risk,” Ashdown said.
Within credit insurance, agreed limits are monitored throughout the policy period rather than fixed at inception. “It's not that you buy it at the start of the policy period and it's forgotten about until the policy renews,” he said. “Every day, if there's new information, that information is fed back to our policyholders one way or the other.” The system, he added, “has to be fluid and it has to be dynamic.”
Financial analysis remains the foundation. “The fundamentals of assessing the likelihood of payment risk still, fundamentally, are about financial analysis - who are the stronger businesses,” Ashdown said.
But in a market shaped by repeated disruption, strength cannot be treated as static. “The strength or the inherent stamina of some of these businesses is weaker than it has been,” he said, even as “overall they're incredibly resilient.”
For insurers, the challenge is no longer simply identifying who looks strong on paper. It is determining who retains the capacity to absorb the next shock, and ensuring monitoring is dynamic enough to detect when that resilience begins to erode.
