http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 12.91Change: 0.12
R/$ = 11.99Change: 0.15
Au 1203.99 $/ozChange: -2.91
Pt 1161.00 $/ozChange: -5.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Sep 23, 2011

Company stresses importance of credit risk insurance

Back
Africa|Risk Management|Africa|Equipment|Products|Services|Solutions|Infrastructure
Africa|Risk Management|Africa|Equipment|Products|Services|Solutions|Infrastructure
africa-company|risk-management|africa|equipment|products|services|solutions|infrastructure
© Reuse this



Correctly scoped business credit risk insurance tends to move to the centre stage in uncertain times, says broker and risk solutions provider Aon South Africa.

Companies insure their assets; how- ever, many overlook or choose not to insure one of their biggest assets, the debtor’s book.

Aon divisional executive director Richard du Toit states credit risk should not be overlooked, given the heightened threat of financial failure and issues such as political risk.

Credit insurance is the underwriting of debtor books, as apposed to asset insurance, which is insuring the physical infrastructure and equipment.

“About 15% of the total business credit market is credit insured,” says Du Toit. Out of all insured businesses, roughly 85% are insured for assets only.

He says the value of the debtors book can easily be in excess of any other asset in the company; this is especially true for trading companies.

Credit risk arises the moment goods or services are supplied to a third party, and the risk is exposed until payment is received.

Du Toit states the essential covers are domestic credit cover, which protects against liquidation and nonpayment by debtors within South Africa, and export credit insurance, which, in addi- tion to commercial debtor cover, has short-term political cover that protects the exporter against default by a foreign government.

“A major benefit of this kind of pro- tection is that companies can explore new markets and consider transactions with debtors whose credit standing is unknown and untested,” he says.

He adds there are only three companies that provide this type of cover in South Africa, namely Credit Guarantee, Coface South Africa and Lombard’s Insurance Company. Many varied credit transactions, on both the domestic and the export market, can be underwritten.

“There are no minimum requirements for companies to acquire credit insurance. Companies of all sizes can insure their debtor books and there are many types of products for companies to choose from. The process of arranging cover involves evaluation of the credit risk exposure, resulting in effective ‘right- sizing’ and correct structuring of cover,” says Du Toit.

Negotiating with underwriters to arrange competitive and affordable rates, the ability to handle the credit and political risk needs of clients with a great variety of business transactions and selecting the most appropriate cover are all considerations for companies when choosing insurance.

“Corporate cash flows are under strain; there are a number of sectors where there are reports of extended credit terms being requested. Higher costs of doing business, owing to factors such as elec- tricity and transport cost increases, are impacting on companies’ profitability,” states Du Toit.

He says insurance rates have remained steady, but that can change in the medium term as companies are seeking to write covers as soon as possible under the most favourable terms.

“Credit exposures are assessed in their entirety, depending on the nature of a given business, and cover should be scoped against a risk management premise. Credit concerns should not be allowed to inhibit business and credit insurance provides solutions,” he concludes.

Edited by: Chanel de Bruyn
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Financial Services to Industry News
YOLANDE SCHOÜLTZ Payroll fraud can damage the bottom-line of many South African businesses
Payroll is one of the biggest expenses in any small or medium-sized enterprise (SME), yet it is also one of the areas most likely to be neglected in terms of risk management, according to multinational enterprise software company Sage.
MIKE DONALDSON Not all companies have security to offer the banks
Using private equity to gain capital, especially for small to medium-sized enterprises (SMEs) that might not meet the criteria to qualify for bank loans, seems like a preferential means of raising capital in South Africa’s current tough economic climate, according to...
TREVOR HOOLE South Africa’s banking supervision, for years, has been at the forefront of conduct and helped to shape local legislation
South Africa’s banking sector is one of the best in the world, in terms of management and conduct, according to audit, tax and advisory firm KPMG.
More
 
 
Latest News
State-owned power utility Eskom and Public Enterprises Minister Lynne Brown confirmed on Wednesday that contracts under the so-called short-term power purchase programme (STPPP) had been renewed ahead of the March 31, 2015, expiry date. Eskom told Engineering News...
The value of copper stolen in February decreased to R12.7-million, from R12.9-million in January, but was 18.1% higher than the value of copper stolen in February 2014, the South African Chamber of Commerce and Industry (Sacci) revealed on Wednesday. In its latest...
Paper and packaging group Mpact has concluded a broad-based black-economic empowerment (BBBEE) deal that will see a purpose-formed trust subscribing for 10% of the ordinary issued shares in group subsidiary Mpact Operations, which holds its South African businesses....
More
 
 
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
 
 
 
 
 
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
RESOURCEFUL The raw material for the pilot plant would be supplied from the dissolving wood pulp plants at Sappi’s Saiccor and Ngodwana mills, in South Africa, and the Cloquet mill, in the US
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96