The Association of British Insurers (ABI) has reported a record rise in business debt as the take up of trade credit cover is likely to leap in the year ahead.
The association has issued new figures that show trade credit insurers have helped UK firms cope with a record level of bad debts.
The study found the value of the average claim made has jumped up by over 200%, to just over £67,000, heavily influenced by the collapse of holiday firm Thomas Cook.
Graham Walsh, ABI’s Policy Adviser, General Insurance, said: “The risk of company failure is continuing to weigh heavily across all business sectors. A prolonged period of economic uncertainty means that businesses continue to face a challenging trading environment, so it is not surprising that there is greater focus on the benefits of trade credit insurance. Customers increasingly rely on the accurate trading information provided by insurers to help inform their decisions, as well as the payment protection underpinning their policy. Firms will want to approach 2020 with optimism, but need to be ready for, and protected against, the risk of bad debts.”
The ABI revealed that in the third quarter of last year the average bad debt claim paid by trade credit insurers, covering UK domestic and export markets was £67,300, the highest ever recorded, and up 228% on the previous quarter.
The value of new claims received leapt to £271 million, from £82 million in the previous quarter. This was a record-breaking quarterly figure, nearly double the previous high of £137 million in the first quarter of 2009, and largely reflected the demise of Thomas Cook and the concerted programme required to repatriate thousands of holidaymakers stranded across the world.