Insurance company to cover suppliers against bad debts

Suppliers who have had their fingers burnt after accumulating debts with ailing retailers Nakumatt and Uchumi could in future avoid such losses by adopting a new insurance product.

Trade credit insurance, rolled out by Heritage Insurance yesterday, will seek to cover suppliers, manufacturers, and even exporters who supply their goods on credit and risk losing out on payments when the buyer becomes insolvent or for some reason reneges on payment.

Heritage Insurance Managing Director Godfrey Kioi said yesterday that a number of suppliers who had signed with Nakumatt and Uchumi have taken up the product as they seek to protect themselves against future losses.

“This product is fairly new in the Kenyan market. We did a valuation to see how suppliers have suffered after their retail credit ran into losses. That is when we saw the need to provide a cover for such instances,” he said.

Mr Kioi, however, emphasised that vetting will be done to establish how creditworthy a supplier’s client is before a policy document is signed.

Contracts

Thus, any supplier who is still trading with Nakumatt and Uchumi does not qualify to obtain the policy, he said.

“Uchumi is already insolvent. Nakumatt is in a scheme, which means that some arbitration is being done to see how the suppliers can be paid. We are not covering any supplier who is dealing with both retail chains for now,” said the Heritage boss.

The policy will also exclude companies with contracts with government entities, citing the political risk associated with such contracts.