Payment defaults in the German economy on the rise
According to trade credit insurers, payment defaults are increasing in the German economy due to the economic downturn. Insurers will probably have to cover around 1.2 billion euros in losses in trade credit and surety insurance in the year ending, as the industry association GDV reported on Wednesday.
That is 44 percent more than a year earlier. "We are seeing significantly more and significantly higher losses due to insolvencies and payment delays than in the previous year," said Thomas Langen, Chairman of the Credit Insurance Commission at GDV. Insolvencies are now also affecting sectors that were traditionally considered crisis-proof: chemicals, mechanical engineering and healthcare. Bankruptcies in both stationary and online retail were a focus of credit defaults.
Among other things, credit insurers insure suppliers against payment defaults by their customers (del credere or trade credit insurance) and therefore play a major role for exports in particular. Allianz Trade (formerly Euler Hermes) is by far the largest credit insurer in Germany. Despite the rising losses, credit insurers increased their cover by 4.5 percent to 587 billion euros. Premium income across the industry rose by five percent to 2.275 billion euros. This was not enough to compensate for the steep rise in claims. The combined ratio deteriorated this year to 82% (previous year: 67.7%).
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Because of the economic downturn, many businesses in Germany are experiencing payment defaults, leading to significant losses for credit insurers. The rise in payment defaults has been particularly noticeable in sectors like chemicals, mechanical engineering, and healthcare, and has even affected traditionally crisis-resilient industries.
Source: www.ntv.de
