Credit insurers ‘step up withdrawal of cover’ as economic weakness persists
Loss of cover worsens woes of cash-strapped companies as sources of working capital dry up
As the country’s lacklustre economic cycle persists, some sectors remain under tremendous pressure, resulting in local credit insurers becoming increasingly cautious, even to the extent of withdrawing credit cover to clients. To protect their money in the event a debtor goes under, suppliers purchase trade credit insurance from credit insurers. The country’s major credit insurers include Credit Guarantee Insurance Corporation of Africa (CGIC) and Santam Structured Insurance (SSI).
But, according to a source familiar with trends in the credit insurance industry, the credit insurers have become wary of adverse trade dynamics, business failure and an increase in claims. As a result, he says, there have been numerous instances where trade cover previously granted has been withdrawn, accelerating the demise of businesses. The withdrawal of credit cover piles woes on cash-strapped companies as sources for working capital dry up. “This affects the sustainability of those companies...
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