The level of payouts on trade credit insurance policies have reached a 10-year high in Northern Ireland, an industry expert has said.
Nigel Birney, head of trade credit at Willis Towers Watson, has today warned that the spike in credit insurance claims is a reflection of challenges facing Northern Ireland companies amid what he called an extremely worrying number of business insolvencies.
The figures from insurance firm Atradius showed the number of recent claims being made in respect of Northern Irish businesses defaulting or failing had increased significantly, representing the highest volume of claims received in a decade.
The insurer also found that there has been a 50% year-on-year jump in high value claims last year, ie. those above £90,000.
Insolvency specialists Begbies Traynor last month found that almost 7,000 businesses in Northern Ireland were recorded as being in a state of distress in the first three months of 2019.
Mr Birney said the backdrop of Brexit and the continuing Stormont limbo is unlikely to offer any significant respite from the pressures weighing on the economy, as the trading environment in Northern Ireland continues to face challenging times.
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He said in many cases, claims payments from trade credit insurers have offered a lifeline to hundreds of NI businesses, with payouts in 2018 at significant levels. He continued: “The increase in claims is a barometer of what is happening in the wider local economy and unfortunately it doesn’t bode well.
“We are now at a 10-year high in terms of payouts which is a clear indication of what is going on.
“In 2018 we estimate that around £8m in claims was paid to Northern Ireland companies as a result of the failure of one of their customers and unfortunately the trend has continued into Q1 2019 with the failure of a number of high profile local companies.”
He said mitigating risk and ensuring protection from non-payment is arguably more vital now than ever before.
Research by Willis Towers Watson found companies feeling enormous strain on cashflow, with the average number ‘days sales outstanding’, creeping up, bringing businesses to the brink of failure, particularly in the construction and retail sector.
Tony Gordon, head of risk services at Atradius Ireland, said: “The trading environment for business in Northern Ireland continues to be challenging. 2018 was a tough year for businesses and for the economy and the figures for Q1 2019 are showing no degree of comfort that a recovery is imminent with upward trend in claims volumes continuing.
“Headline news often pinpoints key sectors such as construction and also foods and agriculture, but in reality, the challenges impact across all sectors.
“The key is to have access to up-to-date information and as underwriters it is vital for us to work closely with businesses, constantly monitoring changes and impacts.”