PAFA asks for government protection of credit insurance

In a letter to the Chancellor Alistair Darling, PAFA chief executive David Tyson warned that the food and flexible packaging industries have been identified as high risk by credit insurance companies.

It follows reports from PAFA members that credit insurance companies are even withdrawing their support from well managed and profitable companies.

Credit insurance was introduced as a requirement in the last decade after the withdrawal of overdraft facilities from SMEs and many larger companies.

However, he applauded the government’s actions this week to underwrite toxic debts for the banks, but urged similar action for credit insurers.

Tyson fears that the withdrawal of credit insurance could lead companies to conduct business on a “proforma cash basis” or even breach banking covenants.

“Government needs to intervene with the credit insurers or take direct action to ensure that our industry can guarantee a return to the credit insurance facilities previously offered.”

There are three main credit insurers that between them write 80% of all such insurance in Europe.

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