Big three credit insurers withdrawing cover from construction

The big three credit insurers – Atradius, Euler Hermes and Coface – withdrew cover on 12,000 buyers last week.

The move will affect a large number of construction companies.

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The Financial Times today says: “The three dominate a market that has long gone unnoticed but is now being thrust into the spotlight as they find themselves unable to provide what has been called ‘the lubricant vital for everyday trade’

“Even though only about 20% of UK companies take out such credit insurance, the knock-on effects of that lubricant being removed are apparent.”

The FT quotes Nick Hedley, chairman of the financial risk division at the broker Jardine Lloyd Thompson as saying: “In the past five or six years, credit insurers have become inappropriate and undisciplined in the cover they offer.”

However the article points out that credit insurers are themselves victims of the general downturn in the economy and do not want to provide cover against filing businesses going under.

“Insurers have seen their claim figures rise steeply as more companies have gone into liquidation,” said the FT.

UK insurers faced £97m in claims over the third quarter of 2008, a 41% jump from the second quarter.