2011 Another year of uncertainty?
15 Mar 2012

15/03/12 | 2011 Another year of uncertainty?

The UK Government’s Insolvency Service published Insolvency Statistics for Q4 2010 on Friday showing a drop in the number of corporate insolvencies both when compared to the previous quarter (-0.2%) and against the same quarter a year before (-11.3%). This means there has been a generally downward trend in corporate insolvencies since the peak reached in Q4 2009 – though it still means that in the UK, one company went bust every 30 minutes of 2010.

For the trade credit insurance market, these figures should be good news – if the general risk of corporate insolvencies is dropping, then the availability of credit insurance should increase and the cost reduce.  Indeed, we at LDPA Credit Insurance have seen an improving market throughout the last half of 2010 and continuing in to 2011 with more insurers active in the market, premium rates have been reducing and the insurers are showing a generally increased “appetite for risk”.

At the same time, it could be a costly mistake to think that trade credit risk is running at manageable levels. Begbies Traynor (the business recovery experts) warn that the number of UK companies likely to fall into administration this year will be up to 10% more than during 2010 and that the number of companies of all sizes suffering financial distress sky rocketed at the end of 2010. Add to this the initial UK GDP figure of -0.5% for Q4 2010 and the unknown impact of the cuts of government spending and the economic situation looks increasingly uncertain.

LDPA Credit Insurance handled in excess of 100 claims during 2010 and LDPA Credit Insurance customers received well in excess of £1,500,000 – claims settled after customers that they had supplied went into some form of insolvency.

Credit insurance can’t take the uncertainty out of 2011, but it might help manage your trade credit risk.