Summary
• Atradius is one of the world’s biggest credit insurers.
• Good credit control is needed.
• A buyer rating tool has been launched.

Atradius is a big credit insurer, in the world’s top three. At any one time it is insuring up to 1,000 timber-related companies, including merchants, joiners, importers and European sawmills.

But its reputation has been tested during 2009 due to its sudden removal or reduction of cover during the depths of the recession, making life difficult for traders, with some having to take on risk themselves.

Atradius UK commercial director Shaun Purrington said he realised the company’s response to the credit crisis had jeopardised long-standing business relationships with Timber Trade Federation members, but he said the company was determined to rebuild bridges.

He empathises with traders angered by its actions but, looking back 12 months, he feels Atradius’ actions were appropriate.

“We have 3,000 customers in the UK so it’s very difficult for us to engage with all of them over a short period of time,” he said. “I do not think [our actions] were disproportionate. The situation was probably compounded by a number of factors and it’s unfair to pin all that on credit insurers. The fundamental economic problems and banks failing was not our fault.”

Mr Purrington said Atradius was forced to act quickly because of the developing economic crisis, which also made it difficult to place the normal emphasis on analysing companies’ past accounts.

With hindsight, Mr Purrington said the one thing Atradius would have liked to have done is treat all companies in the same way.

“It’s inevitable in a sector like timber which is heavily dependent on construction, where construction has fallen off the cliff, you would see a greater proportion of actions taken. Timber was causing a greater concern than some of the sectors which are more immune to economic cycles. But to say we would not offer cover for the timber sector is totally wide of the mark.”

He also said loss ratios were not necessarily the be-all and end-all in assessing companies, though a bad loss ratio may result in a premium increase.

Mr Purrington said some timber companies misunderstood the role of credit insurers and there was also a polarisation in credit performance between firms with tight credit control and those who were lax.

“There is a need in some respects to get back to old-fashioned credit control. We’re not blindly here to accept trade credit risks,” he said. “There are some very well-run companies in this sector that deserve our support. There are companies that have adjusted their credit terms to suit the environment. We hope going forward we can take into account the trading relationships of our customers and their end customer.”

Mr Purrington said he was concerned about the long payment terms operated by some timber firms, as well as evidence that companies were using the government’s tax deferral scheme as a form of working capital.

He said the outlook for credit insurance was now more positive, with Atradius recently extending cover to about 300 timber-related companies following an underwriting review.

A number of “Meet the Buyer” days are also to be held for TTF members, who can talk frankly with Atradius representatives about credit insurance.

It has also launched an online buyer rating tool to give customers more information on the credit rating of companies covered, with existing Atradius policy holders offered the tool free.

Designed to be integrated into firms’ in-house credit management processes, the tool gives alerts to changes in their insured buyers’ ratings and provides historical ratings on their insured buyers. “In the past we have not been so transparent,” said Mr Purrington.

His top advice to companies to help them improve their credit insurance situation is: make sure you understand the credit insurance policy you have bought; share information with the credit insurer; and don’t think the credit insurer is being nosey or intrusive by asking questions.

He also urged companies to review credit management procedures to ensure, for instance, that they have a good record in collecting cash.

Coastal Credit Insurance Brokers Ltd has a checklist for timber companies to ensure the best possible credit insurance arrangements. Read the checklist at www.ttjonline.com/checklist.


Related Files
Coastal Credit Insurance’s checklist for timber companies