Firms step up protection against bad debt risks

Demand is growing for trade credit insurance among businesses keen to protect themselves against financial difficulties in trading partners, according to experts in the field.

Marsh, which specialises in insurance broking and risk management, said on 28 May that it was seeing growing demand for trade credit insurance, which gives protection against non-payment or extended default, as a result of fears that expected interest rate rises could result in more corporate insolvencies.

Tim Fisher, leader of Marsh’s UK trade credit practice, said: “Many organisations are more risk averse as a result of the recession and are acutely aware that even a slight increase in bad debt and interest rates could derail their firm’s recovery as the economic outlook improves.

“Companies are still concerned about the impact an interest rate rise might have on their trading partners. Trade credit insurance provides an added element of credit management discipline and customer insight, as well as protection against trade debt.

“In our experience, companies are more likely to experience difficulties during the recovery when sales are rising. Lenders remain broadly risk averse, which can lead to a working capital crunch. We expect more firms increasingly to use trade credit insurance as they look to grow further throughout 2014.”

Putting in place trade credit insurance could prove to be a wise investment for businesses that want to take proactive steps to protect their financial position.

In some cases, commercial debt litigation may be appropriate to recover money owed and Palmers’ experienced debt recovery and insolvency specialists can provide expert advice in deciding on the action most likely to result in recovery. For more information, please visit our website or contact Andrew Skinner.