In accordance with the data collected by the Polish Insurance Association in 2017, insurers covered receivables (the sum of credit limits) to the amount of PLN 149.7 billion. Accounts receivable coverage was 2% higher than the year before and 5% higher than in 2015.
Fewer insured exports
The amount of insured turnover in 2017 amounted to PLN 488.1 billion, with domestic turnover at PLN 377.8 billion and export turnover at 110.3 billion. High dynamics in comparison to previous years are observed in the amount of insured domestic turnover. In relation to 2016, the dynamics ratio is 106% and in relation to 2015, 115%. Things are different when it comes to the dynamics of export turnover, which in 2017 were at the same level as in 2015, while in relation to 2016 the dynamics ratio was a mere 96%. This decrease results mainly from the reduced demand of companies for export receivables insurance.
Accounts receivable coverage is crucial for the economy
Accounts receivable insurance schemes are one of the most important instruments of safe business. According to the Central Statistical Office (GUS), the total amount of trade credits extended between companies in 2016 was PLN 384 billion and 38% of the total amount of receivables was insured. That means that insurers are the second, besides banks, pillar securing the influx of money into the economy. The total value of short-term bank loans in 2016 was PLN 157 billion (Central Statistical Office data, ‘Balance of the financial results of economic operators in 2016’), whereas domestic exposure of accounts receivable insurance in the same period exceeded PLN 95 billion.
More compensation paid
One important problem addressed by account receivable coverage are the increasing payment backlogs and deteriorating financial and competitive situation of some companies due to increased production and service provision costs. The Polish Insurance Association estimates that in 2017, insurance companies paid out compensation in the amount of PLN 407 million. The Polish Insurance Association estimates that in 2017, insurance companies paid out compensation in the amount of PLN 407 million, which is 28% more than in 2016 and as much as 74% more than in 2015. Continuing high loss ratio dynamics may force insurance companies to verify their risk management policies and widen accounts receivable coverage.
Paweł Szczepankowski, CEO at Atradius in Poland and Chairman of the Accounts Receivable Insurance Subcommittee of the Polish Insurance Association, explains the notion of accounts receivable coverage. You can also read about it on the Polish Insurance Association blog.