Wednesday, 4 April 2012
Credit insurers give mixed response to Greek export risk
German exporters with concerns over the ability of their Greek customers to pay for goods are turning to the credit insurance market for help with varying degrees of success.
Thomas Langen, Head of Atradius Germany
These companies are often afraid they will be left with unpaid accounts if customers are bankrupt. They simply cannot ignore the situation and are looking for insurance solutions.
“We are receiving more and more enquiries from companies that are engaged with Greece,” said Christoph Witte, Head of credit insurer Delcredere. “Most of the queries which come to us are from clients of other credit insurers,” said Mr Witte. “We have profited strongly from the restraint shown by competitors in the crisis of 2008/2009.”
Credit insurers have been a lot more circumspect over granting cover since the credit crisis unfolded across Europe and most of the world’s developed economies.
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One credit insurer in the German market, Coface, has completely withdrawn from supplying cover for Greek risks. “For German companies, there are potentially very high economic and political dangers in Greece, which makes further engagement impossible at the moment,” said Coface Germany spokesman Erich Hieronimus. “The current economic and political situation in this country is no longer straightforward,” he added.
The insurer has noticed a rising trend in the cases of non-payment amongst Greek companies. “Risks must remain calculable,” he said. “In Greece at the moment this is not the case.”
This view is an exception. The other credit insurers, from Atradius to Zurich, have not generally withdrawn cover for deliveries to Greece. But they are more cautious and take a very careful look at the risks.
“The economic situation of companies varies greatly,” said Thomas Langen, Head of Atradius Germany. Companies that depend on internal Greek demand and rely on consumer goods, such as entertainment electronics, are most at risk.
“It is important to differentiate between the good and the bad risks,” said Mr Langen. In the Athens branch of Atradius there are 20 employees, who constantly update the insurer’s data on the situation for Greek risks. “In the present tense situation, suppliers’ credit is even more important than it normally is,” said Mr Langen. “Our clients expect that we will warn them if the situation worsens,” he added.
If a client is in serious danger, insurers reduce their cover, and the deductibles rise. If insurers cancel the protection completely, they usually give their customers 30 days in which to react. “The client then has the possibility to look for other means, such as asking for payment in advance,” said Mr Langen. If the customer is faced with immediate bankruptcy, and the insurer learns of this, the cover for future deliveries is cancelled immediately.
This means that controversial discussions arise between companies exporting to Greece and insurers, says Marc-Peter Büchler of Aon. “There is some annoyance among clients, though not by a long way to the extent of 2008/2009,” he said.
Credit managers at companies can often see from their incoming payments the situation at their clients in Greece, or another countries in serious debt.
So they do have some understanding for an insurer who makes careful checks and in certain cases reduces cover, said Mr Büchler. “But they prefer to deliver goods that are insured,” he added.
After all, many suppliers are tied to long-term contracts. For raw materials one-year contracts are usual and a supplier cannot simply withdraw the product..
It is not necessarily possible to insure everything, and particularly not for the sum hoped for, market sources say. “But there has not been a massive cancellation of cover,” said Mr Büchler. “We do not expect this, either.”
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