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Credendo's John Carter explains why demand for Top Up cover is on the increase

Since the creation of the UK branch of Credendo – Excess & Surety in February 2013 we have seen a dramatic increase in requests for Top Up cover. This is not due to a lack of appetite by insurers, in fact, it’s quite the opposite. We are seeing current risk satisfaction ratios at an all time high but companies who take credit insurance in the SME, National or International business segment will always have challenging risks where they seek full insurance to trade securely. Some of these risks may not be fully underwritten, leading to a gap in cover and these gaps are what drive the enquiries for our Top Up solution.

Partial credit limits (or ‘gaps’) are restrictive to sales but can be for various reasons including the insurer’s capacity constraints, a lack of financial information or simply higher risks.

‘Capacity’ is a feature of any class of insurance, because controls must be in place to avoid being over exposed in a certain sector, country, or on a particular debtor and so on.  A spread of risk is important for most business and with our Top Up product we can provide an extra layer of protection across those risks to bridge the gap. In turn this increases an insured clients’ overall risk satisfaction ratio which significantly improves their limit coverage and boosts banking /finance levels.

Our Top Up solution follows the decision of the primary insurer. We sometimes hear the term “blind cover” used but this is not a true reflection of how our solution works. Instead, our cover is “automatic” because we do not interfere with credit limit decisions nor do we withdraw them; we simply track the primary insurers’ credit limit to prevent extra administrative work for the client. There must be a positive credit limit in place for the Top Up to be available which can be up to double the primary credit limit. If the limit decision is a zero then it is likely to be so for a very good reason – and credit insurance is there to protect against unforeseen losses but also steer clients away from bad debts.

In business we are all involved in sales whether it’s securing new clients, maintaining existing relationships, renewing existing contracts or marketing and branding. Our Top Up discussions are collaborative and not dictatorial and this is refreshing since we are providing additional capacity empowering credit management teams to allow contracts to be agreed and orders to go out supporting the lifeblood of any company: Sales. The reality is that getting paid for those orders is crucial, and insurance is there to provide cover if the buyer/debtor cannot pay.

Uninsured gaps may cause a client to simply trade partially with limited access to finance, or restrict their sale to the level of primary limit agreed or even worse, to not do the deal at all, losing the sale and turnover. The Top Up therefore helps support businesses to sell and grow both domestically and abroad.

We view the increase in Top Up enquiries as a positive evolution in our marketplace because it shows that brokers and clients are looking to secure high levels of cover for the receivables in question.  We work closely with them to provide the best possible solution. However, not all brokers make their clients aware of this facility – Avenue Insurance, since their creation, have recognised the benefit of Top Up and have already engaged with us to help improve levels of cover for their clients and prospects.