While motor insurance costs in the UK have hit the brakes, it looks like we will be seeing acceleration in prices somewhere else… and trade credit insurance giant Euler Hermes has pointed to a couple of culprits.
“On average we are targeting a 5% increase in pricing because of the impact of Brexit and pressure on retail, which has been exacerbated by Brexit,” Euler Hermes chief executive Wilfried Verstraete told the Financial Times. The credit insurer had to respond to changing conditions, he said.
“A rise in import prices starts to hurt margins,” added Verstraete. “It is not a negligible impact.”
Citing increased losses in the UK due to “high severity” bankruptcies, the CEO also shared that Euler Hermes has become more careful. In fact, in the case of Carillion, Verstraete said the credit insurer had been reducing its exposure months prior to the construction firm’s insolvency.
Before its collapse, the fallen construction giant was holding more than £800 million in debt payments owed to sub-contractors. According to the Association of British Insurers’ (ABI) estimate, it will cost credit insurance providers approximately £31 million in payouts.
“The demise of Carillion is a powerful reminder of how trade credit insurance can be a lifeline for businesses in these uncertain trading times,” ABI assistant director Mark Shepherd, head of property, commercial, and specialist lines, said earlier this year. “This insurance is an essential business tool that helps firms trade and expand in the UK and overseas.
Other recent bankruptcies include Monarch, Palmer & Harvey, Multiyork, and Misco.