// Iceland has had its cover pulled from a leading credit insurer as the jump in energy costs piles pressure on the retailer
// It is unusual for credit insurers to target grocery retailers but Iceland’s reliance on large chest freezers means it is disproportionately vulnerable to the rise in energy prices
A major credit insurer has pulled cover for suppliers to Iceland as rising energy costs pile pressure on the frozen-food retailer ahead of a crunch refinancing.
In December, Coface is said to have reduced cover on Iceland to zero. Last year fellow insurers Allianz Trade and Atradius both reduced their coverage levels for Iceland.
Credit insurance protects suppliers against the risk of a retailer going bust between the point an order is delivered and payment received.
The removal of cover can prompt suppliers to demand payment upfront, squeezing a retailer’s cashflow.
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It is unusual for credit insurers to target grocery retailers, which typically generate consistent cash flow. But due to Iceland’s reliance on large chest freezers, the business is disproportionately vulnerable to the rise in energy prices.
After its energy bill jumped from £70 million to about £155 million this year, Iceland is understood to have entered into agreements with renewable-energy providers to lock in the price of 50 to 65% of its energy requirements for the next 15 years.
Last month Iceland said it plans to scale back the amount of chilled food it sells in an effort to reduce its energy bills.
The supermarket is stocking more room-temperature products instead of chilled, according to managing director Richard Walker.
Iceland is also utilising more modern fridges, putting doors on warehouse fridges and placing solar panels on stores and warehouses to be more energy efficient.
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