Before you write such a tendentious article, it would be wise to do thorough research first, be knowledgeable and yet apply a little better adversarial techniques.
It makes sense that virtually every retailer you interview now has a gloomy outlook on the future. But to now accuse credit insurers of squeezing retailers' lifelines is going too far.
Some facts:
- A credit insurer assesses the creditworthiness of companies based on available financial data, filed with the Chamber of Commerce or, if necessary, they are requested from the companies concerned. In addition, they collect payment experiences. Based on this data, credit insurers determine what risks they are willing to take on a company (total = obligo) and per individual supplier.
- Credit insurers offer this cover for insured suppliers mostly without collateral (unlike banks)
- Usually, the information is sufficient to issue limits and there are no issues.
- In cases where the information is insufficient, the relevant company will be contacted and additional information requested. Only if the insurer provides coverage can premium also be charged.
- Yet it is not always possible to provide the desired cover because a company's financial situation is insufficient. The credit insurer then does not wish to take the risk.
- There are also numerous companies that file their figures late or not at all, do not wish to provide figures to credit insurers, divert profits and assets to a holding company above the operating company, are slow to pay, etc. Credit insurers may end up providing no or limited credit limits on these companies.
- Despite economic growth over the past eight years, much of the retail sector has been in dire straits for years. So even before the Corona crisis, numerous companies have failed and many more retailers would have failed even without it. The Corona crisis accelerates this process and, in addition, also puts healthy companies in trouble.
- The government has taken several measures to support businesses during this difficult time. This support is slow in coming and banks are very reluctant to provide emergency loans. This is despite getting a state guarantee of 90%.
- Credit insurers have not yet received support for the purpose of being able to continue providing credit limits. During the 2009 financial crisis, credit insurers did eventually get support to continue providing credit limits on financially weak companies, but this help came quite late. Again, it was not in the first package but hopefully these measures will now come soon.
- It is also a misconception that insurers are exiting the retail sector en masse. On an individual basis, they are looking at whether cover can still be provided; on companies with sound financial bases, cover is still being provided. Again, often without collateral.
- But what would you do if a retailer indicates it is likely to apply for debt restructuring and asks its suppliers to simply write off a large portion of their receivable. Who do you think should pay that, the credit insurer?
- What to make of big retailers who were still making huge profits in 2019 and now tell their suppliers to their face that they will only get their money after 90 or 120 days. And that while orders are also being cancelled. If you don't accept it as a supplier, you never have to come back to them. Who should solve that, the credit insurer?
- What VNO-NCW states is also incorrect, no policies are being cancelled because of Corona, new applications for credit insurance are still being accepted but at higher prices and perhaps limited coverage. It is also incorrect that insurers can simply change terms and conditions. Order risk is also insurable.
- With the crisis, uninsured companies are still trying to find quick cover for their customers. But available capacity is becoming increasingly scarce.
Credit insurers are commercial organisations that insure companies against insolvency of their buyers, regardless of the reason why they became insolvent. The role of setting credit limits is to prevent insureds from becoming involved in buyer insolvency (by setting credit limits). Now, despite the fact that insolvencies would skyrocket, if one were to insure everyone without proper credit rating, these insurers would cease to exist within now and a year. That is impossible.
Professor Hoogduin is the only person in this article to clearly state where the solution lies. The government should broaden the guarantee for business loans by guaranteeing wider coverage that credit insurers should provide in specific cases.
It is unfortunate to see that in a crisis situation, blame is immediately sought instead of looking for solutions. This crisis puts many companies in direct trouble. Now it is important for companies, suppliers, banks/financiers, credit insurers and the government to join hands and support each other. This is the only way to overcome the crisis and limit the damage.
Paul van Uden - managing director Xolv
