12/03/13 | Behind Burdens
If there’s one thing that defines CIFS’ corporate “philosophy” it’s that underwriting excellence must be backed by meaningful and open communications if we’re to provide policyholders with sustained business benefit.
A case in point: Burden’s the family-run, specialist materials supplier to the construction industries, where cashflow problems and serious misjudgements on likely demand from a major supply contract with B&Q led to a spiral that eventually saw the company enter administration.
An archetypal response to the slow payment reports that bedevilled Burden’s trading patterns might have been to jump ship and withdraw cover abruptly – and indeed some market players did so.
Instead CIFS underwriter Ian Selby visited the company and worked with management – giving them time to negotiate asset sales (including a £4 million site divestment to Tesco) as well as new financing facilities enabling them to trade at more appropriate levels.
As trading conditions – including the accumulation of far higher stock levels than anticipated – continued to work against the company, we managed our – and our policyholders’ – risk downwards, advising those with significant exposure to Burdens of the detailed reasoning behind our actions.
Finally, at the end of the summer our dialogue with the company and its suppliers led to the inevitable conclusion that the company could not continue in its existing format and we withdrew cover. However, for its major suppliers amongst our policyholders we effected staged reductions in cover.
Following the sale of 22 depots to Wolsey in November Burdens went into administration later that month. CIFS are currently evaluating policyholder claims, but what is clear is that their losses (under policy excesses) have been minimised by CIFS’ close, ongoing analysis of the company’s financial position, using the most up to date market information available.
By involving policyholders throughout the assessment process we ensured they could adjust their risk exposure to appropriate levels and, of course, our Lloyd’s of London backed policies have provided cover against the losses sustained.