Luke Johnson lambasts credit insurer ‘oligopoly’

Johnson, founder of private equity group Risk Capital Partners, voiced his opinion during a debate on corporate growth, turnaround, decline and rebirth organised by asset-backed lender Burdale.

Johnson experienced the impact of credit insurers’ flight from retail last winter at Borders UK, the books chain in which he had a majority stake and has since sold.

Credit insurance is dominated by three companies – Coface, Atradius and Euler Hermes – which together account for about 85% of the worldwide market. Although insurers have faced criticism, they have also suffered from the failure of prominent retailers such as Woolworths.

But an audience poll taken at the Burdale event – attended by retailers, turnaround specialists and financiers – revealed ongoing concern. A quarter said the credit insurance model is “fundamentally flawed” and almost 58% backed strongly critical comments about insurers from Focus DIY boss Bill Grimsey earlier this year. No comment was available from credit insurers on the result.

Some of the big insurers, including Coface and Atradius, have now begun to extend cover to retailers, hoping that the worst of the recession is over. Stephanie Ardaens, marketing brand and operations manager of Coface, UK and Ireland, said: “The cover is likely to be more generous, because the lowest point of the recession is behind us.”