Credit insurer Coface is demanding more transparency from businesses in return for trade credit insurance.
Coface, one of the largest trade credit insurers in the UK, has begun a two month transition to new contract terms with its customers as part of an overhaul of its business model.
The French firm said that premiums will remain higher than pre the recession because past premiums did not accurately reflect the risk of businesses failing to pay their bills.
Under the new plans Coface - which is understood to have 1,500 business customers across all sectors in the UK - will, for the first time, publish the credit assessments of some of the UK’s largest companies, which could include retailers.
Coface managing director, UK and Ireland, Xavier Denecker called on businesses to be more transparent with their current trading performance in return for trade credit insurance cover for their suppliers.
Denecker told The Daily Telegraph: “What we are saying is that opacity has its costs. If I don’t know where my risk is I will put my premium higher than it was.”
Coface said it would give its supplier customers its credit score for the businesses they supply, to explain the level of risk more fully. Businesses can then challenge Coface if they felt these scores to be unfair. Successful challenges would result in a move in the premium and the cover within seven days.
Coface will ask customers to use a service called CreditPal to record and update their trading performance.
Coface is one of the three key trade credit insurers, including Euler Hermes and Atradius. They came under fire during the recession, criticised for pulling cover and contributing to the demise of some high profile retailers, including Woolworths.
Denecker added that credit limits were now “coming back to a more normal level” and said the trade credit industry had not died with the economic crisis.
“Some politicians thought the model was completely outdated and would not survive the crisis. It did survive,” he said, adding that reinsuring risks and recapitalising had been key.