Weak link

17 November 2008 By Rachel Sanderson

European suppliers are squealing because credit insurers are pulling back. The squeeze is real, but two large insurers are already backed by the Dutch and French governnments. The better way forward is for customers to speed up payments and let the market cull some weaklings.

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The three largest credit insurers Euler Hermes, Atradius and Coface – control 80% of the nearly E2tr credit insurance market. They are reviewing their coverage of industries considered most vulnerable to the consumer downturn – automakers, retailers and real estate according to several people familiar with the matter.

In past recessions, the withdrawal of credit insurance proved a good forward indicator of company weakness.

Shares in DSG International, the electricals retailer, fell 20% following a report that Atradius was reviewing its coverage of the retail sector. Credit insurers have also withdrawn cover from European suppliers to US carmakers General Motors and Ford Motor.

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