Members of the Berne Union, the association for export credit and investment insurers, are reporting an increase in demand, fuelled by increasing market turbulence.
Lenders are demanding greater protection in light of continuing bankruptcies and bailouts, while businesses are seeing credit and investment insurance as an additional source of liquidity.
Berne Union Secretary-General, Kimberly Wiehl, comments on this trend: “What you’ve got to bear in mind is that cushioning against economic shocks is our normal line of business – in good times and bad. Where other financing resources have seized up, we’re there keeping open the international channels of trade and foreign direct investment. And we’re open for cover in emerging markets because, again, that’s part of our normal activity.
Berne Union president, Hidehiro Konno, adds: “On a union-wide basis, we have been growing our new business volumes steadily over the years, from US$472bn in 2001 to over US$1.3tn during 2007. But it’s not just about big numbers. We’re talking about exposure that is global. Our members are insuring trade and investment into China, Russia, Saudi Arabia, India and Turkey as well as into the large trading markets of North America and Europe.”
Part of the appeal of credit and investment insurance is its simplicity, especially with derivative financial instruments now under heightened scrutiny. “The risk assessment can be complex. The level of expertise and local knowledge required is significant. But the business, fundamentally, is a simple one,” comments Berne Union vice-president John Salinger.
“One dollar covered means one dollar of exposure means one dollar potential loss and perhaps one dollar of recovery down the road. No leverage. No derivatives. Just a risk assessed and cover provided,” he adds.
The 50 members of the Berne Union covered over US$1.3 trillion worth of business in 2007, which is about 10% of the world's total export trade. Members are both private companies, offering worldwide risk management solutions, and state backed export credit agencies, focusing upon the support of national exports and outward investments.
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