Carillion went into liquidation less than a fortnight ago, owing an estimated £1 billion to businesses in the UK.
A stark reality is, of that £1 billion the Associated British Insurers (ABI) believe only £31 million would be ultimately paid out in claims to suppliers and sub-contractors of Carillion due to only a small percentage of companies having trade credit insurance.
Assistant director at the ABI, Mark Shepherd commented: ‘The demise of Carillion is a powerful reminder of how trade credit insurance is an essential tool that helps firms to trade and expand in the UK and overseas.’
However few businesses see credit cover as a priority, often citing ‘we know our customers really well’ and ‘we’d know if there was a problem.’ Though Carillion had many outward facing signs things were not right, other high profile insolvencies such as Palmer & Harvey and Monarch Airlines may not have been as easy to spot to the untrained eye.
Over and above the assurance of being paid a claim following a failure or non payment, a key benefit of trade credit insurance often over looked, is the market intelligence. Insurers frequently have access to confidential information and will meet with companies to gain the full inside track of a business or market performance. It is this knowledge, not in the public domain, which allows the insurance industry to act as an early warning system as what is happening with an individual company, a group or sector and providing advice to businesses to revise their exposure.
Chair of the work and pensions committee, Mr Field, passed comment on KPMG, the auditor, stating ‘Another day, another company goes bust hot on the heels of a clean bill of health from a Big Four financial services firm.’
Mr Shepherd highlighted, ‘For all businesses, bad debt could really put their day-to-day operations at risk.’