Forecasts are difficult. Not just the general ones but those for the UK or the global economy, and from the narrow view of those in the credit insurance industry, it is this that counts, because it’s the economy that drives company failure.
So, for a review of the year this is what this newsletter focuses on – the economy and business failure. Depressing enough, even though it largely ignores the immense human suffering around the world.
In January of this year, I said that we thought the credit market would harden aggressively if claims spiked, but if the (anticipated) increase in claims continued on a more gradual basis the market would remain soft.
In respect of the credit insurance market, it looks like I was right. Rates over most of the year have remained competitive, and the increase in claims has been steady, albeit on a steep curve. So far this year we have handled some £4M of claims – well over double 2021, and the highest in the last 5 years (bar 2019).
I commented on the supply chain issues and staff shortages in 2021, but (fortunately for me) made no reference to the Economic forecasters pointing to a `bounce back’ in 2022, and there were plenty of them.
Then President Putin had his 19th century moment and in late February invaded Ukraine, and the world changed – again. We now have even higher inflation, widespread strikes over pay, supply problems from China thanks to an aggressive lockdown policy over most of the year, and a government here that shows every sign of being out of step with the real world for most of this year.
The problems in the commercial world seem to relate primarily to the recruitment of staff and the price of energy and raw materials. Of these three, 2 were evident in 2021, so to an extent it’s been business as usual. This has driven the credit insurance market this year, and on the ground, we haven’t yet seen the reactions that many though would come about.
It’s catching up though. We’re just starting to see rates creeping up, and distinct signs that capacity is contracting. This is a good old-fashioned reaction to claims, rather than the reactions to forecasts we saw at the start of the pandemic.
2023? More of the same, at least we can hope so. Any more major shocks to the global economy are something none of us want to see. Sometimes, boring is good.
John Cockshutt