Why More Successful Irish Companies Are Focusing on Acquiring Credit Insurance

In recent years, there has been a noticeable uptick in the number of successful Irish companies turning their attention to credit insurance. This trend reflects a growing recognition of the critical importance of protecting against the financial risks associated with trade credit. As Ireland’s economy continues to expand and businesses explore new markets both at home and abroad, the need for robust financial safeguards has never been more pressing.

In the wake of global economic uncertainties, ranging from global conflict to fluctuations in international trade, Irish companies are recognising the necessity of securing their financial stability. Credit insurance has emerged as a vital tool in this regard, offering protection against the potential pitfalls of non-payment and customer defaults. For Irish businesses, particularly those in sectors with extended payment terms or high export activity, credit insurance is becoming an essential component of risk management strategies.

This growing reliance on credit insurance is not just about mitigating risks, it’s also about empowering companies to pursue new opportunities with confidence. By ensuring that their receivables are protected, Irish businesses can maintain steady cash flow, secure financing more easily, and ultimately, drive sustained growth. As the global market continues to evolve, credit insurance is increasingly seen as a cornerstone of financial prudence and strategic business planning in Ireland. Here’s why more Irish businesses are prioritising this form of protection.

Here’s why more Irish businesses are prioritising this form of protection.

Mitigating the Risks of Non-Payment

One of the primary drivers behind the increased focus on credit insurance is the need to mitigate the risks associated with non-payment. Even the most successful companies can be vulnerable to the financial instability of their customers. In January this year, PWC reported the finalised insolvency levels rose by a third (32%) in 2023. The report stated that they expected further increases in the business failure rate in 2024, with overall insolvency levels projected to reach close to 1,000 – being closer to the average 20 year insolvency rate per year. Corporate insolvencies reached 2 per day in 2023, up from 1 a day on average in 2021, and are forecast to move towards 3 per day in 2024.*

A sudden default by a major client can lead to significant cash flow problems, disrupt operations, and even threaten the survival of a business. Credit insurance provides a safety net by covering losses arising from non-payment, allowing companies to trade with confidence and reducing the risk of catastrophic financial impacts.

Supporting Business Growth and Expansion

As Irish companies seek to expand both domestically and internationally, credit insurance becomes an essential component of their growth strategy. Entering new markets often involves extending credit to new customers whose financial stability may be uncertain. Credit insurance allows businesses to explore these opportunities without the fear of significant losses if a customer fails to pay. By covering potential losses, credit insurance enables companies to offer more competitive payment terms, helping them win new contracts and grow their market share.

Strengthening Financial Management and Stability

Credit insurance is also a powerful tool for strengthening a company’s financial management and stability. By transferring the risk of customer default to an insurer, companies can stabilise their cash flow and better manage their working capital. This is particularly important in industries where long payment terms are common, and the risk of bad debt is high. Credit insurance allows companies to plan more effectively, knowing that their receivables are protected, which in turn supports more accurate financial forecasting and strategic planning.

Enhancing Relationships with Financial Institutions

Another reason for the growing adoption of credit insurance in Ireland is the positive impact it has on relationships with financial institutions. Banks and other lenders view credit insurance as a sign of prudent financial management. It can improve a company’s creditworthiness and make it easier to secure financing on favourable terms. In some cases, when receivables are insured, they can also be used as collateral for loans, providing companies with greater access to capital to fund their operations and growth.

Navigating Economic Uncertainty

The global economic landscape is increasingly unpredictable, with factors such as geopolitical tensions, fluctuating commodity prices, and economic downturns creating challenges for businesses. Around the water cooler, mutters of an impending election this November has companies moving cautiously, especially those with a significant presence in the US. Irish companies, like their counterparts worldwide, must navigate these uncertainties while maintaining steady growth. Credit insurance provides a layer of protection against the economic risks that can lead to customer defaults, allowing businesses to continue operating with confidence even in turbulent times.

Gaining Competitive Advantage

In a competitive market, offering favourable payment terms can be a key differentiator. Companies that can confidently extend credit to customers without worrying about non-payment are better positioned to outmanoeuvre competitors. Credit insurance allows businesses to offer these terms while minimising risk, helping them attract and retain customers. This competitive edge is particularly valuable in industries where margins are thin and customer relationships are crucial.

A Strategic Move for the Future

The increasing focus on credit insurance among successful Irish companies is a strategic move that reflects a deeper understanding of the complexities of modern business. By protecting themselves against the risks of non-payment, these companies are not only safeguarding their current operations but also positioning themselves for future growth.

Navigating the complexities of today’s business environment requires more than just strategic planning; it demands proactive risk management. Credit insurance is a powerful tool that can safeguard your business from the financial risks of non-payment and customer defaults, allowing you to focus on growth with peace of mind.

As more companies in Ireland recognise the benefits of this form of insurance, it is likely to become an even more integral part of the business landscape, helping to drive sustained growth and resilience in the face of uncertainty.

At Phelan Caswell Insurance, we understand the unique challenges faced by Irish businesses. Our team of experts is here to guide you through the credit insurance options available, ensuring that you find the coverage that best suits your needs. Don’t leave your financial stability to chance—talk to Phelan Caswell Insurance today and discover how we can help secure the future of your business.

Visit: https://pcinsurances.ie/contact-us/

Email: info@pcinsurance.ie

Tel: +353 1 620 2030

PWC Source: * https://www.pwc.ie/media-centre/press-releases/2024/restructuring-update-q4-2023.html