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Insurers wield the knife
Archived article dated Friday January 30th 2009
The large providers of credit insurance - Euler Hermes, Atradius and Coface - have over recent months become the evil enemy of the retail industry.
By Glynn Davis
Their withdrawal of cover to the suppliers of a growing number of retailers has resulted in a band of merchants going under including Woolworths and Empire Direct. And there are a number of other merchants currently in combat with these insurance companies as they realise the serious implications for their businesses from a lack of cover for their suppliers.
Focus DIY is currently fighting its corner as it finds a lack of cover is prompting its suppliers to demand bills are paid much more quickly and in some cases are requesting up-front payments for goods. This is stretching its working capital and putting it under great financial pressure.The chief executive of Focus DIY Bill Grimsey has been putting forward a strong case for how the insurers are jeopardising the futures of many businesses with their decisions to cut cover. Instead, he suggests everybody should be pulling together to work through the current downturn as it is in nobody's interest for retailers to shut up shop.
As we all know insurance is all about managing risk and in an efficient world it has to be assumed that the decision to cut cover by the insurers is based on their belief that specific retailers are doomed to failure.
They would argue that their withdrawal of cover on those retailers that have ultimately gone under more than justifies the harsh decisions that they are currently making on many other companies - this is the business they are in. In contrast, some of those failed retailers will no doubt argue that they might still be around today if it had not been for the insurers pushing them over the edge.
This situation is indicative of just how hard it is out there, whether you are an insurer or a retailer. Tough decisions are being made and the ramifications can be far reaching and deadly.
glynnd@theretailbulletin.com
Tagged as: VIEWPOINT | INSURANCE | EULER
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