Rising Insolvencies Increase Demand for Credit Insurance in Asia Pacific, Atradius Survey Reveals

PR78814

AMSTERDAM, May 20, 2019 /PRNewswire=KYODO JBN/ --

Growing number of businesses taking more strategic approach to credit management

While global GDP growth is forecast to slow from 3.2% in 2018 to 2.7% this

year, global insolvencies are expected to rise 2%. As an integral part of the

global supply chain, Asia-Pacific businesses that trade on credit need to perform

a sound assessment of the risk of payment default of B2B customers.

This has become more complex, requiring a more strategic approach to credit management.

Asia Pacific economies continue to be the main growth engine of the world

economy. Although domestic demand in the region remains robust, several

downside risks appear to cloud the growth outlook. Slowing trade growth in many

countries prompts Asia Pacific businesses to increase their use of trade credit

in B2B transactions to stay competitive and gain market share.

As revealed by the May 2019 Atradius Payment Practices Barometer survey

(https://group.atradius.com/publications/payment-practices-barometer-asia-pacifi

c-2019.html) for Asia Pacific,  the total value of B2B sales on credit in the

region increased to 55.5%, up from 48.1% last year. The biggest increase in

Australia rising to 71.5% from 47.7% last year. Overall, the more frequent use

of trade credit raises the risk of customers' payment default. On average,

29.8% of the total value of B2B invoices issued by respondents in Asia Pacific

was overdue.This percentage is highest in India (39.0%) and lowest in Japan (13.2%).

Assessing the buyer's creditworthiness, prior to giving credit terms, is

essential to the credit sales process. Respondents in Singapore (53%) and China

(51%) are the most likely to perform this. Reserving against bad debts, should

the assessments turn into a nonpayment, is practiced by 41% of respondents in

Taiwan and Indonesia, versus 33% in the region.

To remain financially sound and avoid liquidity issues caused by payment

defaults of customers, 41% of respondents had to pay their own suppliers late.

This was most often expressed by respondents in India (51%) and Indonesia

(46%). Ultimately, an average of 2.1% of the total value of respondents B2B

sales on credit (up from 1.9% last year) was written off as uncollectable.This

suggests that businesses are less successful in collecting invoices than last year.

On average, 31% of respondents in Asia Pacific expect customers' payment

behaviour to deteriorate, and long overdue invoices (more than 90 days overdue)

to increase. Most concerned are respondents from India (52%), followed by

Indonesia (35%).To protect their business against the rising trade credit risk,

42% of respondents in the region said they will increase the use of credit

insurance.This percentage rises to 51% in China and Hong Kong. Australia

follows suit with 47%.

Andreas Tesch, Chief Market Officer of Atradius commented "The level of risk,

instability and volatility in the current economic climate is increasing daily.

Payment defaults across the globe are rising and with them, we anticipate a

steady rise in insolvencies in the coming years. The economic slowdown in China,

the main export destination for many economies in the region, along with

the still unsolved and potentially escalating Sino-US trade dispute, being the

risks that could further deteriorate international payment practices and the

global insolvency outlook. In this scenario, it becomes much more complex for

businesses to perform a solid assessment of the risks connected with trading on

credit. This requires a strategic approach to credit management, towards which

we see growing interest in Asia Pacific".

Eric den Boogert, Managing Director of Atradius Asia commented "Overall,

economic conditions in 2019 are expected to be more challenging than last year.

But Atradius in Asia is well prepared to manage the downside risks that

businesses are facing. Our understanding of the global economy, as well as of

local markets across Asia, is central to helping our customers' grow their

businesses. Our customers can be confident that we have the underwriting

knowledge that can help them avoid unpaid invoices as much as possible and

steer them towards healthy businesses and opportunities".

The May 2019 Atradius Payment Practices Barometer for Asia Pacific

(https://group-staging.atradius.com/publications/payment-practices-barometer-asi

a-pacific-2019.html) is conducted in Australia, China, Hong Kong, India, Indonesia,

Japan, Singapore and Taiwan. The reports can be downloaded from the Atradius

website at https://group.atradius.com (Publications section)

(https://group-staging.atradius.com/publications ).

About Atradius

Atradius is a global provider of credit insurance, surety and collection services,

with a strategic presence in over 50 countries. The credit insurance, bond and

collection products offered by Atradius protect companies around the world against

the default risks associated with selling goods and services on credit. Atradius is

a member of Grupo Catalana Occidente (GCO.MC), one of the largest insurers

in Spain and one of the largest credit insurers in the world.

You can find more information online at https://group.atradius.com

For further information:

Head Office

Asia Pacific

Christine Gerryn

Director of Group Communication & Commercial Development

Phone.: +31-20-553-2047

E-mail: christine.gerryn@atradius.com

https://group.atradius.com

Sylvia Wong

Regional Marketing Manager Asia

Phone: +852-3657-0810

E-mail: Asiapress@atradius.com  

www.atradius.com.hk

Connect with Atradius on Social Media

Twitter - https://twitter.com/atradius

Linkedin - https://www.linkedin.com/company/atradius/

You Tube - https://www.youtube.com/user/atradiusgroup

Source: Atradius N.V.