News & Events

Trade Credit Insurance - SME Case Study

Wednesday, March 4, 2020

Paying claims is an important element of credit insurance but this case study shows the guidance and support we can give our policyholders in a claim situation.

The policyholder was an £8m turnover business employing less than 20 people and in the business of supplying electrical components to a range of industries in UK, Europe and further afield.  Insured with us, Tokio Marine HCC (“TMHCC”), for 10 years and never having previously made a claim, this policyholder experienced their first major insolvency in 2019 with one of their biggest customers going into administration leaving them with a significant debt and substantial amounts of work in progress. What underwriters experienced in this process can sometimes also forget however, is that the process itself can be a mystery to companies not familiar with the insolvency laws.

The claim was reviewed by their specialist broker and submitted. Within 2 days of a request by the policyholder, TMHCC had made an interim payment to ease the policyholders cash flow and enable him to pay his monthly wage bill.  The claim investigation continued and shortly afterward the full value of the goods delivered was confirmed and paid.  This was a six-figure sum, 10 times what the policyholder was paying in his annual premium and critical to his cash flow.  Without this payment the policyholder's business would have been in serious trouble.  The entire claims process took less than 6 weeks.

But the problems didn't end there.  The policyholder's stock was sitting at the failed buyer's premises - some of it incorporated into the end product and some of it just sitting in stores.  The policyholder and TMHCC both wanted to recover those goods under retention of title.  This wasn't straight forward as the administrator had sold the business and was not accepting any responsibility for the retention of title.  The policyholder was a bit lost at this point and looked to TMHCC to provide assistance.

TMHCC discussed both the retention of title and work in progress and also the importance of the future trading relationship; the purchaser of the business took an aggressive approach to the retention of title claim, making a nominal offer and suggesting that failing to accept it would end any chance of a future trading relationship.  TMHCC and policyholder worked together to agree a strategy, with the valued input of their broker,  and the result was a higher than expected recovery under the retention of title, the placing of orders for the work in progress and a good relationship between the policyholder and the purchaser of the business.  Everyone was a winner.

The policyholder later thanked TMHCC for "their sound advice and calm head during a really challenging and difficult time that he had limited experience in being involved with", demonstrating not only the importance of the trade credit insurance product from a financial perspective but also the support Tokio Marine HCC provides at difficult times working in partnership with the policyholder and broker.

If you wish to discuss your policy, please visit our page here contact us at creditsupport@tmhcc.com or 01664 423000.

Written by Jane Hull, Underwriting Director – Credit and Sam Moody, Claims Manager.