Allianz Trade CEO on the risks and opportunities facing UK businesses

The ethos behind the creation of Allianz Trade in the UK closely mirrors the purpose at the heart of trade credit insurance – to protect businesses and livelihoods, and to stimulate entrepreneurship.

Then-named Euler Hermes, Allianz Trade was formed as a result of the UK government’s decision to establish an entity to promote exporting in the wake of the First World War. In 2021, the organisation welcomed its first woman leader in its 100-plus year history with Sarah Murrow (pictured) stepping up as CEO of the UK and Ireland business. Speaking with Insurance Business, Murrow noted that her two-decade-strong career within Allianz Trade is a powerful indicator of the opportunities that exist within the trade credit insurance market.

“I’ve been presented with every opportunity that I ever wanted but I had to seize those opportunities,” she said. “I think sometimes when people are given them, they don’t want to take that risk but I’ve found that, when you do, it really pays off and is a very rewarding experience. And when I look among my friends, I see how rare it is for someone of my generation to have been with one company for 20 years which is testament to the different opportunities the company has given me along the way.”

Trade credit insurance – a safety net for UK businesses

It’s a running joke in the trade credit insurance industry that people will ask each other how they fell into it, she said, but she knows why she stayed in the sector – because of the opportunity at hand to protect the very fabric of society, particularly amid tough economic conditions. Credit insurance is hugely beneficial to society, because it can stem the knock-on effect of insolvencies on an economy and prevent financial shocks from reverberating down the entire supply chain.

In her role as CEO, Murrow looks after a team of over 300 staff across the UK and Ireland – a remit that offers her a horizon view of the challenges and opportunities facing brokers and clients. Businesses generally are facing a difficult time due to the much more sensitive economic situation, she said, and Allianz Trade is forecasting a 16% year-on-year increase in business insolvencies in the UK.

“Last year realised a 51% increase over 2021, albeit on a very low base given that we were in COVID and there was a lot of money flowing in the economy which kept business insolvencies artificially low,” she said. “That 16% increase is net 29% above our 2019 levels – which was our most recent ‘normal’ year.

“That increased level of business insolvencies is putting credit risk very much back on the agenda for our clients, and also UK businesses in general. This is really a result of lower growth, higher inflation, higher cost of financing, and obviously more non-payments. In fact, our recent studies show that suppliers are being paid much more slowly by their customers. So, what we’re seeing is that corporates are essentially becoming banks, and not necessarily knowingly.”

In addition, there are lingering supply chain disruptions coming out of COVID, she said, which has seen businesses becoming more cautious about having inventory on hand. But given that consumer demand is down, just-in-time inventory levels are becoming more just-in-case, which is creating an oversupply of inventory for some businesses which is negatively impacting their returns. Transport, equipment, textiles and electronics are among the sectors most impacted by this glut of inventory.

“We saw a failure earlier this year when an online retailer cited inventory issues as being one of the main reasons they failed,” she said. “They stocked up on Christmas stock and they couldn’t get rid of it and had a cash flow issue as a result. So, I think supply chain issues are definitely one of the reasons that business owners are looking to protect their receivables.”

Trade credit insurance – opening up opportunities for trade

Despite these challenges, it’s not all bad news for UK businesses, Murrow said, and there are opportunities to be had in any economic conditions. In her time in the UK, she has seen first-hand that UK businesses are very agile and entrepreneurial, and she feels confident that they will be well-placed to source and seize those opportunities. And with the backing of trade credit insurance, clients can trade with greater confidence despite the sensitive business environment.

“Because we’re looking out for them and underwriting their credit risks, they won’t be hampered by the fear that if they trade on credit terms, they might not get paid,” she said. “There’s a great opportunity for these businesses to leverage the power of credit insurance to trade during difficult economic times.

“Another big opportunity is the growth of B2B e-commerce. We saw this accelerate during the pandemic and it’s a trend that’s just going to continue. We believe in the trend so much that we have actually developed two new solutions around e-commerce. The first is an e-commerce solution for businesses that trade directly with their customers online. [The second] is our solution for buy now, pay later providers, which we’re quite excited about.”

Supporting clients through tough economic conditions

Murrow highlighted that it’s clear customers are looking to Allianz Trade to help them grow safely during and through the downturn and there are several ways her team go about lending that support. With businesses going through so many challenges, a critical aspect of this is continuing to provide robust levels of coverage. This allows insureds to keep their credit limits open and to continue to trade. It’s always a good time to buy credit insurance, she said, but now is a great time.

In addition, the business looks to support its brokers and clients by giving them a 3D view of the risk environment they’re trading in. In a deteriorating economic situation, there will be weak spots and growth spots, she said. When Allianz Trade assesses credit risk it does so through three lenses –geopolitical risks, sector risks and buyer risks. That view allows the customer to fully understand the credit risks of the businesses they’re trading with – and also pinpoints potential areas for growth and prioritisation.

“We’re able to show them where there’s a good country, a good sector and a good buyer, so they can direct their sales team to that opportunity and potentially increase sales with them,” she said. “I think showing our customers the bright spots in their customer database or even for prospecting is a very valuable thing for them right now.”

Murrow noted that Allianz Trade’s broker partners are essential to ensuring that clients can make the most of this growth-oriented tool and that the business’s broker distribution channel is critical to the sustainability of the trade credit insurance market. Brokers enable real connectivity with the market, she said, and offer an independent third-party view of what their clients need and want from their insurance providers.

“Also,” she said, “they do a really great job in working with different trade associations and different partners to really articulate why the product is valuable and why a customer might need it.”