http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.85Change: 0.03
R/$ = 10.93Change: 0.05
Au 1231.31 $/ozChange: -0.06
Pt 1248.50 $/ozChange: -1.00
 
 
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 Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Sep 23, 2011

Company stresses importance of credit risk insurance

Back
Africa|Aon South Africa|Coface South Africa|Credit Guarantee|Lombard’s Insurance Company|Africa|South Africa|Asset Insurance|Credit Insurance|Equipment|Export Credit Insurance|Physical Infrastructure|Products|Scoped Business Credit Risk Insurance|Services|Solutions|Transport|Du Toit|Infrastructure|Richard
Africa||Africa||Equipment|Products|Services|Solutions|Transport|Infrastructure|
africa-company|aon-south-africa|coface-south-africa|credit-guarantee|lombards-insurance-company|africa|south-africa|asset-insurance|credit-insurance|equipment|export-credit-insurance|physical-infrastructure|products|scoped-business-credit-risk-insurance|services|solutions|transport-industry-term|du-toit|infrastructure|richard
© 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
Swedish Ambassador to South Africa Christian Meuwly will next week inaugurate the final roll-out of the new vertical shaft brick kiln (VSBK) at clay brick manufacturer Langkloof Bricks’ facility in Jeffrey’s Bay. The VSBK formed a part of economic, social and...
Hot on the heels of the launch of Rustenburg’s rapid transport system’s brand name and logo last week, a negotiation framework agreement (NFA) has been formally agreed to and signed by the Rustenburg Local Municipality (RLM) and taxi and bus operators affected by the...
The runway at the George Airport, in the Western Cape, has been rehabilitated to improve safety, in terms of run-off and storm water drainage, and the structural capacity of the pavement surface. The scope of work comprised the extension of Runway 11/29, the...
More
 
 
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
 
 
 
 
 
This Week's Magazine
Integrated energy and chemical company Sasol has partnered with Unisa Graduate School of Business Leadership (SBL) professor and founder and CEO of PanAvest Partnership Dr Douglas Boateng to publish a series of books on executive supply chain management aimed at...
MORNÉ DU PLESSIS Increased urgency and burgeoning awareness of the importance of these issues are beginning to change political risks and, thus, State responses to environmental concerns
The World Wide Fund for Nature’s (WWF’s) 2014 Living Planet Index (LPI) indicates that there has been a 52% decline in vertebrate species since 1970. The Index tracked the trends of 10 000 discrete populations of over 3000 vertebrate species between 1970 and 2010.
Rwanda has joined a number of East African countries seeking to import electricity from Ethiopia as its demand grows. After it became apparent several generation project it is implementing will not come on stream early enough, now plans to import 400 MW from Ethiopia...
Metrorail’s first new passenger train will arrive in November next year, says Passenger Rail Agency of South Africa (PRASA) CEO Lucky Montana. “Next year we will be able to put our hands around the infrastructure and equipment we have been talking about for so long.”
The Competition Commission has launched an investigation into what it says are “price fixing, market division and collusive tendering in the market for the manufacture and supply of automotive components to original equipment manufacturers” (OEMs, or vehicle...
 
 
 
 
 
 
 
 
 
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