Insurers are continuing to support high levels of global trade due to the current volatile risk environment, according to a new report by the Berne Union.
Political changes in the Middle East and North Africa, as well as sovereign debt concerns in Europe and the US continue to impact trade risk. However, overall the trade finance market has made a swift turnaround since the global crisis of 2008/09, the report indicates.
During 2011, Berne Union members insured US$1.7tn worth of exports – more than 10% of international trade. This is up from last year’s total of US$1.4tn.
Out of the total amount insured, US$ 1.5rn represented short-term export credit insurance in support of exports with a repayment period of less than one year.
Medium to long-term export credit insurance, covering transactions with repayment terms of typically three to five-years and more, amounted to nearly US$200bn.
Short-term and medium to long-term business recorded double-digit growth of 19% and 10% respectively.
Claims paid took an upward trend towards the end of 2011, due to the global economy and political developments. Claims paid to customers for defaults on medium to long-term transactions increased by 37%, from US$ 1.8bn in 2010 to US$ 2.5bn in 2011. According to the report, the loss ratio for 2011 should be similar to 2010.
Looking ahead, the Berne Union believes that ECAs and private market insurers may face challenges due to the current inability of many banks to fund themselves in US dollars – a problem that could be intensified by the Basel III and Solvency II regulations. And while insurers saw a turnaround in the credit insurance market in 2010, risks are back on the map for 2012, the report says.
Last Updated April 03, 2012
Reader Comments