Debtor insolvency is extremely common in the construction industry, with the sector continuously topping the table in the UK Government Insolvency Service’s quarterly reports. You can however prevent this from happening and protect your business through Trade Credit insurance, also known as Credit insurance.
Trade Credit insurance covers the risk of a bad debt where a customer is unable to pay for goods or services that have been provided on credit terms. The policy guarantees that the insured debts will be paid, even if a customer is insolvent.
Why does my business require trade credit insurance?
Like many businesses, construction firms provide goods or services to other businesses on credit terms. Trade Credit insurance is therefore a good way to manage your business’s credit risk, it provides the tools for best practice credit management and ensures you can trade with confidence.
In January 2021, the Office for National Statistics published stats showing that 12% of all construction companies surveyed had “low or no confidence that they will survive until the end of April 2021”. Although the construction sector has, thankfully, kept trading throughout the various lockdowns, there have been significant delays and increased costs which will build pressure on cashflows and ultimately, cause insolvencies. This does not only apply to smaller firms, many major construction firms and contractors can, do and will suffer insolvency, look at Carillion as an example. Therefore, we highly recommend construction firms consult a trade credit insurance expert to discuss their risks.
Shockingly, Credit insurance companies pay out more claims for the construction sector than any other sector of the UK economy, showing the importance of protecting your business with this cover. Without Trade Credit insurance, it is possible that your business could be crippled by bad debt. At Specialist Risk, we are governed by our mantra “Difficult. Done Well.”. Trade Credit insurance is a niche product that requires careful risk assessment, and it is important to work with an insurance broker who has specialist expertise and capabilities in Trade Credit insurance to ensure your business has the appropriate cover in place.
Our parent company, Specialist Risk Group, recently acquired the trade credit specialist, The Channel Partnership which forms part of Specialist Risk Insurance Solutions. The specialist team have worked with construction clients for over 25 years and take a consultative approach to each client they work with. Whether you have existing credit insurance or not, they can look at your risks and identify areas where they can add true value.
Get in touch today to arrange an introductory call with our expert team and find out how we can help your business:
020 7977 4800