The International Credit Insurance and Securities Association (ICISA) has revealed that credit insurers lived up to their obligations during the financial crisis.
ICISA has also told that insurers paid out claims at a ratio of approximately 84% in 2009, up from around 40% immediately after the demise of Lehman Brothers in September 2008.
ICISA’s president Clemens Von Weichs and its executive director Robert Nijhout both emphasised that trade credit insurers demonstrated their ability to respond to the difficult financial situation.
However, they also warned that the cost of capital and a more cautious risk environment in the crisis still challenges the credit insurance industry. Thishas resulted in higher premiums and stricter conditions, a development which is expected to continue.
Nijhout comments: “With a high but stabilised claims ratio, trade credit insurance confirmed the industry’s ability to manage risk and their role in a difficult financial environment. The quality of credit limit management is appreciated by customers. They show today an even increased interest with regard to this consultancy and the management of credit risk through a credit insurance company.”
In total, there are now around 20 million running credit limits, with insured exposures at €1.8tn (US$2.4tn).
Exposures dropped by 10% in 2009, following repercussions of the financial crisis leading to lower trade volumes.
“The market is now in a stable but still challenging situation,” Von Wiechs adds.
This is not the first time that trade credit insurers have had to deal with a financial crisis, as Nijhout explains: “Trade credit insurance has existed since the beginning of the last century. Credit insurers went through economical downturns or financial crisis together with their customers. The industry will continue to give this support to their customers.”