In just one year everything changed, causing forecasters to take a deep breath and reassess their models. Fast forward to today and the domestic outlook appears to be on solid footing. The insolvency rate is negative 10% (nice improvement from 2008, but far from the 19% of last year) and forecasted to go to minus 4% in 2016.
Soooo, what does that all tell us? Nothing really because each business has its own set of unique customers and simply cannot apply generalized numbers to their portfolio to draw much of a conclusion. What it can do, however, is give us all a sense of things to come and to prepare for the worst.
Speaking of preparing for the worst, I’d like to mention that we are all duped, from time to time, into a sense of complacency when things are trucking along nicely. While 2008 made us all more diligent in our approach to business it did remind us all that things can take a turn for the worse rather quickly. But while we sit here in Mid-August of 2015, I get the sense from businesses we deal with on a day to day basis that no one is really that concerned with a rapid deterioration and maybe they should be.
There are steps to take to mitigate risk and not all of them have been considered. For instance, in 2008 everyone rushed to insurance carriers to insure their credit portfolio only to find that carriers had tightened the reins so much that getting a policy was an all or nothing proposition. By 2010 that had changed and carriers were willing to offer policies on certain segments of the portfolio, like a region or country or even the top 10%. I would urge you to consider getting one in place prior to a catastrophe rather than after one.
Here are two graphs you might want to see….