Credit Insurance, 20-25% More Expensive In H1

The price of credit insurance policies gained 20-25% in the first half of the year, amid increasing demand and risk of bankruptcy or insolvency among debtors, according to a representative of insurance brokerage firm Marsh Romania quoted by NewsIn. A commercial credit insurance policy covers the risk of payment default among the debtors to a company dealing in production, distribution or services.

"Our customers in the production or distribution sectors are quite interested in this product. However, insurers have become more rigid and selective in offering insurance against debtor bankruptcy or insolvency, considering the current economic crisis," said Eduard Simionescu, Head of Credit Insurance with Marsh Romania. According to him, based on such insurance, the seller will issue invoices with a payment deadline of 30-to-90 days and, if the debtor does not make partial or full payment in before deadline, the insurance will compensate the seller for the value of the outstanding amount.

Statistics indicate that the number of bankruptcy cases has been increasing lately and is likely to continue to increase. "Insurers are very careful before issuing such policy, especially in the construction industry, where the risk is quite high nowadays," Simionescu added. According to him, the Fast Moving Consumer Goods sector (foodstuff, beverages, coffee, tobacco) currently has the best risk rating.

"If producers were flexible as they were in the past few years, the risk at play would be quite certain. Estimates for this year point to 5,000 bankruptcy cases or even more," he added. Simionescu pointed out that insurers were already paying out on claims filed towards existing credit insurance policies in the first six months of the year. "Claims can reach as high as hundreds of thousands of lei," he said.

While the price and conditions for credit insurance have been raised, no major claims have been filed towards management liability insurance, so prices remained the same as last year. "Many companies continue to buy management liability insurance, bit only as a formality to prove that they observe the law," Simionescu said.

The Romanian insurance market gained 5.6% in the first half of the year to 4.7 billion RON. The increase on the non-life insurance segment compensated the decline of the life insurance segment, according to provisional data released by the Insurance Supervisory Commission. The non-life insurance market gained 7.6%, while the life insurance market lost 2.7%.

Insurance companies registered in Romania paid claims in the amount of 2.9 billion RON in the first half of the year, up by 47.8% from the corresponding period of 2008. Of the total sum, 2.7 billion RON was paid towards non-life insurance claims.