Broker: credit risk in Australia rocketing
An Australian insurance broker has revealed its latest credit risk index score which shows a still worsening credit risk environment. Here's why brokers should be offering trade credit insurance.
Trade credit insurance broker NCI have revealed that its credit risk index score has continued to rise from the 4th quarter of 2011, indicating a worsening of the current credit risk environment. For the second quarter of 2012 there was a 3.5% lift from the first quarter of the year.
NCI stated there has been a 20% increase in the number of credit insurance claims and a 64% increase in the dollar value of claims for the past quarter, largely supported by the failures of Retravision Southern and Hastie Group.
Majority of key credit managers interviewed stated that 'days sales outstanding' have increased and they have incurred bad debts in the last quarter. They believe that in the next three months, it will be difficult to get payments from debtors.
According to ASIC, for the year up to May, total corporate collapses have increased to 13.1% over the last year, which is 8.3% higher than during the GFC.
In June, insurer QBE told Insurance Business that trade credit insurance is the product every broker simply should be offering.
"Trade credit insurance is a natural offering for a broker,” said Richard Wulff, QBE Group General Manager of Trade Credit and Surety.
“A broker goes to a client and asks what kind of risks they have and this will include property, liability, or perhaps marine insurance if they do international trade. During that conversation it is a natural question to ask: ‘what about your trade receivables? Aren’t you worried about that?’”
Earlier this year OAMPS Insurance Brokers also established a trade credit insurance division which provides products related to trade debtor insurance, surety products, bank related funding and securitisation needs for the Australian domestic and export market.