Woolworths collapses - who is next?

During boom times, credit insurers earn easy profits, since few firms default. But now during recession, it seems, credit insurers are creeping out of their responsibilities to avoid possible payouts.

Woolworths was considered to have it's flaws, but it wasn't until credit insurers turned their backs on the much-loved Woolies that the collapse became inevitable. JJB Sports and DSGI - which owns giants such as PC World and Currys - have all had their credit insurance policies cancelled causing share prices to plummet by up to 30%.

Leading credit insurers Euler Hermes, Atradius, and Coface have also significantly reduced the cover they offer - including refusing coverage for suppliers of American car manufacturers General Motors and Ford. They also cancelled over 12,000 insurance policies in November.

Circuit City filed for bankruptcy owing suppliers Hewlett Packard and Samsung $234 million. American International Group required a $113 billion bailout from the US government after losses stemming from its role as a major underwriter for the American subprime mortgage industry.

What's the solution? Is Gordon Brown right?

Category:

News & Politics

Tags:

• Euler Hermes
• Atradius
• Coface
• woolworths
• dsgi
• jjb
• pcworld
• pc world
• currys
• general motors
• ford
• aig
• gordon brown
• credit crunch
• credit insurance
• insurance

[morgonsilen]

When there is a tide you can see who has been swimming naked. Credit insurers are the first to notice and point this out.

[cd27cd27cd27]

It is very easy to sensationalise this story and find a scapegoat. Sure insurers are pulling the plug on bad risks, the alternative is to sit back, wait for the collapse and pay claims. The main issue being missed here is that many businesses like Woolies were mis-managed for years. They could survive in good times but would not withstand a recession. As for the US motor industry, problems have been endemic for years. The question with many of these businesses was not will they fail but when.

[jenniferashley99]

These banks are the root of what is wrong. I work for a company that is number 2 and we are on the verge of going bankrupted..by watching this I now understand.