Credit insurers urged not to cut cover in 'critical' IT channel

Following generic warnings of cover reductions from Atradius and QBE, one distributor claims cutting the limits into e-tailers and other tech suppliers would be 'misguided and irresponsible'

Credit insurers have been warned that any move to reduce exposure in the IT channel could stifle essential supply lines during the COVID-19 crisis.

CRN understands that credit insurer QBE this morning informed customers that it will be undertaking a reduction of 25 per cent on "many" of its credit limits in response to the "unprecedented times".

The email, an excerpt of which was seen by CRN, also details how QBE would reduce to nil a number of credit limits below £250,000, predominantly in 11 sectors, including consumer electrical.

Rival Atradius also wrote to customers on 20 March informing them that it "may need to apply a demand-led downward adjustment to our underwriting strategy",

The latter has signalled its intention to reduce or withdraw cover on a number of etailers, according to Paul Cubbage, managing director of distributor Target Components.

He branded any such moves by credit insurers "irresponsible and misguided", and said Target has written to Atradius to urge a rethink.

"Not only are e-tailers critical to supplying key workers and supporting the mass adoption of remote working, they are also experiencing a spike in demand," Cubbage told CRN.

"It's irresponsible in that the continued supply of IT, telecoms, networking products is more crucial than ever in the current circumstances, not just to get kit to front-line services but also to support businesses and consumers with home-working and home-learning.

"It's misguided because in most cases there is no risk-based or commercial reason for restricting limits on the businesses they seem to be focusing on."

In a letter to customers, Alun Sweeney, regional director, UK & Ireland at Atradius, admitted the risk environment is "severely challenged" and said many businesses are already struggling to trade.

"Regrettably, there will be business casualties, and as you would expect we are actively monitoring our risk portfolio to support your business and at the same time assess each business' ability to survive these extreme events," he said.

A second distribution boss, who preferred not to be named, said: "I would imagine that all insurers will try to reduce their exposure right now if they can, and will try a number of tactics," he said.

But Cubbage urged credit insurers against "chopping limits on a blanket basis" in the tech supply sector, which he branded "critical".

"Certainly they'll be wary of retail, travel and hospitability, but this blanket response doesn't seem to have any intelligence behind it," he said.

"This would restrict the country's ability to get kit out. Indirectly through our customers, we supply government departments, police forces, the fire service, the NHS. This kit is going where it needs to go and you can't just turn the tap off.

"Underwriters have to be able to defend what they do on an ethical basis during this period. The usual rules, where someone just changes a number on a spreadsheet, shouldn't be applied."

In a statement sent to CRN, an Atradius representative added: "Our strategy remains customer focused despite these challenging and exceptional times and we are actively reviewing our exposure and working closely with our customers to confirm where trade is continuing and what cover is needed."

CRN has approached QBE for comment and will update the story accordingly.