January 2025: The Highest Level Of Insolvencies Since 2009
I was reading in yesterday paper that insolvencies in January 25 were at the highest level since the financial crisis in 2009 with nearly 2,000 business failures. This mirrors what we are seeing in our own business where we have approaching £3,000,000 of gross claims submitted in the last month and whilst a seasonal peak in the New Year is pretty much the norm this is by far the highest figure that I have seen since I started in the credit insurance industry. The 2 things that have struck me are the speed of the failures and that in the majority of cases they were well rated and the type of risk that would have left us scratching our heads had we not been able to obtain cover.
In one case a €1,500,000,000 European group applied for a winding up petition on their UK sub and the directors beat them to it by placing the business into Administration, I have never seen that before, which does just go to show that you are never too old. Their rating was very strong indeed, with very significant amounts of cover available and this failure came right out of the blue. This made me think about a recent new business case where the decision was to not take up our recommendation of a premium rate of less than 0.20% of turnover and to rely instead on credit reports, which is OK from a cost perspective, but as we are looking at companies in our £3,000,000 that were well rated it will be a sorry about that from the credit report provider and 90% of the money back from the credit insurer.
It is to the credit of our underwriting partners that they are holding their nerve and supporting our clients at what is a tricky time, it is a fine line between their own profitability and then being so tight on their underwriting that no one would want to either renew or buy a policy that was full of refusals and cancellations. There has to be a balance in helping to steer away from poor looking risks whilst providing the peace of mind for the business owners to sleep at night and then have the confidence to take up new opportunities, safe in the knowledge that they will be paid.
We have seen some excellent claims service with large claims agreed and paid quickly and within days of submission on a large 6 figure settlement that would have caused serious cashflow difficulties for a longstanding client, who had previously only ever seen modest claims.
A couple of thoughts to finish with, firstly that within our £3,000,000 of claims, the failed companies were not so very long ago someones blue chip customers. Secondly a message for any uninsured companies is to get in touch and we can have a chat on how or if we can help to mitigate bad debt risk and at the same time to enhance their credit management and put something in place to help to safely support profitable and sustainable growth.
