OTHER NEWS
In light of a few significant developments in the Credit Insurance industry in South Africa, we decided to provide an update on the industry as a whole. The key developments as follows:
The Santam decision has a significant impact on the market as a whole, as they had an estimated market share of approximately 15%. Given current market conditions, it will be very challenging for the remainder of the market to absorb this capacity, particularly within the time frames provided.
The decision taken by CGIC will have a smaller impact, as the policies identified make up less than 5% of their book. However, it is significant in light of the fact that it represents a departure from a long-held philosophy within CGIC to support all clients through all trading cycles. Historically, the action taken by CGIC has been limited to remedial actions on policies and exposures whilst still providing cover.
The actions above, when seen in context of an increasingly difficult economy (and the risks associated with this), means that corporates will have to re-evaluate how they mitigate credit risk in future. In the short term, there will be an increased focus on compliance and there will be continued pressure on limits. As such, we believe that it is a time to trade with caution and independently evaluate risk on buyers. In the long term there should be a move to decrease reliance on insurers insofar as decision making is concerned, as well as traditional ground up policies, as the impact of an unexpected termination can be catastrophic.
Make contact with Cinque to obtain our assistance in managing your policy as well as to develop strategies to ensure the long term sustainability of your business insofar as credit risk management is concerned.
