A well used truism in our market is that debtors can represent the most significant asset on the corporate balance sheet. This is certainly the case for advertising and media companies but the exposure extends beyond 'amounts owing.' The failure of a major client can result in losses relating to unbilled work-in-progress or even forward bookings of space and time in the national press or on TV.
As the sector evolves and use of social media and innovative marketing strategies are adopted, trading relationships between the media companies and their clients change. Our role is to repeatedly ask the right questions to ensure policy wordings accurately reflect these changes.
Our work in the sector ranges from insuring sales of feed and/or seed and we also act for companies who breed, rear and finish livestock.
Seasonal factors need to be taken into account when negotiating cover. Horizons of credit risk may well be considerable and should be reflected in the credit insurance facility. Terms of payment may span months rather than weeks.
We never forget that that low margins remain a feature of the sector. For all our clients we therefore try to deliver exceptional value. Credit insurance policies are typically priced as a percentage of insurable sales. In circumstances where commodity prices can fluctuate considerably, creative policy wordings may well be required to ensure that as turnover levels increase, the relative cost of cover reduces.
The chemical sector has moved into a global industry with many Groups now having manufacturing sites in various countries to gain the advantages of economies of scale. Consolidation of buyers means higher concentrations of risk in account receivable. In addition, sales of chemical products are increasing to the developing countries of the world, where the political risk of non-payment is more prevalent. All this means the need to have a specialist credit insurance broker to advise on the best form of risk transfer is crucially important.
CRS and its overseas partner network - if this is required - are well equipped to provide the support and assistance required to negotiate and manage these ever more complex credit insurance programmes.
Increasing commodity prices can significantly influence exposure levels and credit limit requirements. As credit insurance policies are frequently rated as a fixed percentage of turnover, a significant hike in pricing can have a dramatic impact on premium cost. We design credit insurance programmes to manage and mitigate such increases.
Creating underwriting appetite in this sector is challenging. There is frequently a need to look beyond the report and accounts of your customer. Relevant issues may well include the importance of a construction project and the strength of main/sub-contractors.
The construction sector has also been the subject of government legislation regarding payment terms and procedures. We work closely with lawyers to understand the implications for credit risk and also arrange joint seminars for CRS clients.
We act for some major companies in the construction sector. These range from multi-national distributors of products to contractors and sub contractors involved in complex exposures relating to work-in-progress, variations, day work, certifications, retentions etc.
We also place surety bonds.
The change in consumer spending from high street to on-line has been a contributory factor to several well-known insolvencies in this sector. There has been consolidation in IT companies joining forces to offer hardware, software and maintenance services from a one-stop shop, sometimes across European countries. It is important to have clarity in an increasingly complex supply line and knowledge on how key buyers are maintaining their cash flow. 4G is being introduced.
We see more risk in areas of the economy where there is rapid change. It is crucial to keep abreast of all the current developments that affect your business and this is why CRS makes it its business to know understand, and react to, developments in this fast moving trade sector.
Our clients range from OEM's to multinational resellers who have worked with CRS to develop programmes to support significant growth in top-line sales. Seasonal payment terms often feature in this sector and such terms must be recognised by insurers when negotiating policies.
Our clients range from companies in the fuel sector to major suppliers of gas and electricity.
A feature of the sector can be long term supply contracts. This creates challenges in circumstances where most credit insurance policies are written on an annual basis and reflect the short-term basis upon which most contracts are concluded. We work with insurers who understand these issues and appreciate the wider implications of working in the sector - a gas or electricity supplier cannot simply turn off supply as the result for the customer is likely to be swift, and terminal.
Our fuel and energy clients have to balance high volumes and extremely fine margins. Even a modest failure can therefore materially impact on bottom-line profit. Our focus is therefore to achieve flexible and cost-effective policy structures that genuinely support sales growth.
CRS has developed a significant involvement in this sector. Exposures are polarised and range from the major low risk food retailers to highly leveraged hotels, manufacturing and distribution companies, restaurant chains and foodservice companies.
Credit insurance features across the supply chain. In the meat sector for example credit insurance will cover transactions made by the feed supplier, the farmer, the abattoir, food company/processor/butcher etc. We see our role as being to negotiate satisfactory levels of cover to support sales made by our clients but we never forget that continuity of credit insured supplies into their business is also critical.
Private equity investment is a feature of the sector and the highly geared nature of these transactions creates challenges for clients and insurers alike. We work with the private equity houses to understand the structure of these investments in order to optimise availability of cover for our clients.
Our team has long established relationships with companies in the sector. These range from major stockholders to engineering and fabrication clients.
Policies within this sector will invariably require non standard policy wordings to reflect the nature of the business. Policies may need to be extended to offer cover for work in progress exposure and consignment stock.
A key requirement on metals policies tends to be the negotiation of flexible discretionary limits to assists in trading with machinists and smaller customers.
We have worked with paper, print and publishing clients for many years and have a close understanding of the sector's particular requirements.
The sector comprises a range of risk profiles - from large, international publishers to small printing partnerships. Understanding these sub sectors is key to properly understanding a Client's requirements. A Paper distributor selling to a number of smaller printers will require a completely different approach to Publishers selling to internet retailers. Packaging is also included in this sector grouping, and these businesses could be selling to literally anyone and all categories of risk.
This will remain a difficult market for the foreseeable future. The resulting pressure on profit margins and cash flow makes leads this one of the most high risk sectors for credit insurers. CRS understands that up to date financial information, a close understanding of the client's customer's order book, and close monitoring of payments are some of the key requirements to successful credit insurance policy management.
The growth of this sector has been considerable and reflects a general increase in the number of prescriptions being written in UK and global markets.
We work with manufacturers and distributors of pharmaceuticals. Parallel importers of patented branded drugs have to contend with limited product availability. Suppliers therefore insist on cash, or close to cash terms, while customers still require open credit. This can create demands on cash flow which can be addressed with finance, backed by credit insurance.
The generic market is altogether different. This is volume based and price driven. Our clients use credit insurance to support sales growth. Prompt underwriting decisions are therefore essential.
Many Companies go straight to their Bank when bonds are required, but the alternative is to approach a "Surety" - an insurance company. A major benefit is that it does not impact on the supplier/contractor's overdraft facility.
Bonds are widely used in construction and civil engineering for a variety of contractual situations, including advanced payment, performance and retentions. They can also be used to defer import duty and are commonly used in the travel industry to protect customers who pay for their holiday in advance.
CRS has the expertise of finding solutions within surety market or combination of markets to place a Bond.
In a dynamic, fast moving and high risk retail environment CRS works very closely with our clients to ensure they have access to reliable and up-to-date information on key buyer risks.
Policies also need to reflect 'different' trading practices. Your customer's terms and conditions of supply may take precedence and self-billing, consignment stock etc may need to be reflected in the policy wording.
The UK credit insurance market has longstanding, historic connections with the timber sector.
Supply chains are complex - CRS acts for importers, primary and secondary processors as well as timber merchants. A significant proportion of UK timber products are destined for use in the construction market. Our knowledge and experience in construction really plays to the strengths of the CRS team.
Assessment of risk in the timber sector creates challenges. Margins amongst the merchants can plummet when stock levels are high and prices fall. Reliance on published accounts alone is therefore dangerous. We look to partner underwriters who know and understand the sector and can look beyond pure balance sheet information.
We work with a number of major transportation companies, many of whom have exposures to high street/retail risk.
Clients in this sector will typically be in a relatively strong position when seeking to obtain payment for services, particularly if they are involved in storage of goods. Possession of product of course provides a very clear incentive for the customer to pay promptly. Frequently the policies are designed to reflect the client's ability to minimise loss through use of liens and charges over stock held in warehousing.
In circumstances where import duty and VAT is payable on behalf of the customer the policy may need to be amended to include these. We can also place Duty Deferment Bonds.
Any travel Business relying on "credit pipeline monies" is exposed to the risk of insolvency.
In recent times, there has been much change and rationalisation on the high street with leading companies facing financial difficulty and several well documented failures which have left "uninsured" suppliers high and dry.
Banks and Financial institutions have noted the uncertainty within the sector, which they now regard as "high risk" making credit insurance and surety protection, particularly relevant.
At CRS we have the knowledge and expertise to keep you informed within the rapidly changing travel sector, tailoring bespoke policies to reflect your needs and procedures to protect your business against the unforeseen.