How has the availability for credit insurance changed given the global economy?

Since the second quarter of 2011 the international economy has experienced a new era of uncertainty and upheaval and this has increased the risks involved in trading within Europe, where payment delays and unpaid debts have increased significantly. In the UK, for example, the economic environment is tough and suppliers have experienced greater trading risks, regardless of customer size and longevity. Unfortunately, this can mean that suppliers are reluctant to extend credit to their existing customers and to reach out to new markets.

Trade credit insurance offers protection from financial loss when receivables remain unpaid. Insurers work closely with businesses on a contract-by-contract basis to help them navigate risk, a service which many rely on during times of economic uncertainty and which gives them the reassurance they need to extend credit to customers.

Have growers been asking for increased levels of cover given the ever more unpredictable weather conditions? If so, is it costing them more to fully protect themselves?

The food sector is particularly vulnerable to the effects of external factors, the unpredictable weather being the most important. Resulting poor harvests and the increased use of materials such as fertilisers to counteract challenging growing conditions can put significant pressure on costs. Political considerations can also drive up prices, such as the recent ban on grain exports from the Ukraine.

The sector has also seen changes in the route to market, such as the declining role of wholesalers and the increase in specialist agents. And within the structure of the retail market, there has been a decline in the traditional fruit and vegetable outlets, while supermarkets have gained an increasing share. All these factors can put extra pressures on the cash flow for growers.

While the price of cover will reflect these trends, credit insurers have built up expertise within the food sector, advising and guiding companies trading throughout the whole world.

What range of insurance options are available to fresh produce businesses? Are there any new options available?

Credit insurance should reflect a company’s needs in terms of the level of security from bad debt required; their cash flow requirements; the profile of their customers; and the countries where protection is required.

The majority of companies find that an agreed level of cover on all their customers (whole turnover) is best suited for their needs. However, products are also available which are tailored specifically for small to medium-sized companies with turnover below £10m, while small companies can now obtain instant credit insurance quotations online. Credit insurance providers also offer debt recovery services and business information reports to ensure companies can assess the creditworthiness of their customers on a regular basis.

What are the major issues facing fresh produce companies in relation to insurance at the moment? Is there any particular advice you’d give growers in the current difficult economy?

Prompt payment has recently become an issue at government level after business minister Michael Fallon said that he would publicly name and shame big businesses who fail to sign up to the Prompt Payment Code.

Nonetheless, businesses should still be aware of the potential impact of payment delays, unpaid debts and changes in payment terms and conditions on their cash flow, especially with customers who represent a large share of their volume sales or revenue. In addition, they should recognise that increasing raw material and transportation costs may result in reduced profit margins if prices cannot be increased.

The best advice is for companies to implement thorough risk management and credit control procedures to protect their cashflow. —