The current difficult economic situation is forcing companies to attempt to secure their claims more often. Credit insurance companies are increasing their prices significantly due to higher risk. While insuring a CZK 1 billion loan used to cost CZK 3 million last year, this year it costs CZK 10 million.
According to Markéta Stržínková, head of the largest credit insurer on the market Atradius, demand for credit insurance among companies increased by 30% this year. Stržínková said companies are willing to accept less favourable conditions in order to obtain insurance. “A greater amount of damages raises the price of the insurance. We register the price increase with all the larger insurance companies,” she said. The insurance price is currently around 0.4%-1% of the volume of the claim. The insurer covers 85% of possible damages. Július Kudla, CEO of the second largest insurer Euler Hermes Čescob, said insurance companies need to take the increase of indemnity prices into account. “The price of our indemnity insurance grew by 35%-40%. Even though we do not project the whole growth into our insurance prices, the prices still increase,” Kudla said. He also said that it is currently impossible to insure businesses in countries like Ukraine or the Baltic states but also in some industry sectors. “The construction sector, for example, is practically uninsurable,” Kudla said.
Interest in claims insurance is growing not only among exporters, but also among companies active on the Czech market.
Before, it was mostly exporters who showed greater interest in claims insurance. “Today we record a general increase in demand from all kinds of companies. The current uncertainty made more companies realise that the security of claim coverage is necessary,” said Martin Najman from the Export Guarantee and Insurance Corporation (EGAP). He said the interest in insuring exports to Germany fell because the volume of trade with Germany is decreasing. “A new country that appears in the top five of the territorial structure is the USA. Our insurance company registers an increase in demand for countries such as Serbia, smaller states of former Soviet Union and other, previously rarely demanded territories,” he said.
According to Stržínková, it is now difficult to insure exports to Russia and Ukraine due to the crisis, though these territories could be insured without problems up until recently. “Claims from some of the EU member countries, such as the Baltic states and Hungary, are also currently uninsurable,” she said.
Insurance companies are demanding higher prices for insurance policies, but they are also dealing with greater damages. “Payment discipline has worsened significantly, announcements of failure to pay have increased by hundreds of percent, in the construction business in particular. We have also recorded an increase in damages by more than a double year-on-year in this sector. Other sectors such as steelworks and processing industries have also showed growing demand and worsening payment discipline” Stržínková added. Najman expects the pressure to increase the prices to last throughout the year due to the higher risks and damages.
