Fabrice Desnos, CEO of Euler Hermes UK has refuted claims that companies have been driven into administration by the withdrawal of cover from some insurers but he warned that businesses will no longer be able to rely on statutory accounts for their credit ratings.
Critics claim that companies may have to cease trading because insurers were beginning to withdraw trade credit insurance if management accounts were not made available rather than the insurer referring to statutory accounts lodged with Companies House.
In reply to the criticism Desnos, said: “It has nothing to do with us. If anything, it proves how difficult it is to analyse credit risk based on statutory accounts, because some statements in the public domain are not as strong as they first look. Historical accounts are getting too old to be meaningful and in a time of crisis, you can’t rely on performance figures on a period two years in the past.”
Recently, suppliers to McCains, the frozen food brand, saw their insurance cover withdrawn when the business declined to provide management accounts to Euler. And clothing retailer Bay Trading collapsed after a chain reaction was set in motion when its auditors were about to issue a financial red-flag with an emphasis of matter paragraph. Euler Hermes withdrew credit insurance from its suppliers and Bay Trading announced it had folded soon after.
In reference to the problem Desnos would not discuss individual cases, but said the credit insurance community was being made a scapegoat. ‘Some businesses would like to create smokescreens by blaming somebody else,’ he said. He emphasised that he was not unsympathetic to the plight of companies in the current climate, and the most current set of figures could only help companies secure cover adding, “Not disclosing information to the credit insurer means you don’t think your suppliers need to know up-to-date information about the company.”
The government has just launched a £5bn credit insurance scheme, which will let companies apply for a top-up if the UK’s three biggest insurers Euler Hermes, Atradius or Coface reduced their cover. However Accountancy Age revealed that the government would rely on the same documentation as private sector insurers.
Date:26 June 2009
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