A group of Arab and Islamic ECAs gathered in Beirut last year to launch the Aman Union, an alliance which aims to raise the profile of export insurance in Islamic countries. Shannon Manders speaks to Abdel-Rahman Taha, chief executive officer of the ICIEC and the main driving force behind the pioneering union.
The Aman Union was jointly launched by the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), part of the Islamic Development Bank, and the Arab Investment and Export Credit Guarantee Corporation (Dhaman).
According to Dr Taha, the main objective of the union is to develop the commercial and non-commercial risks insurance industry in the Organisation of the Islamic Conference (OIC) member countries.
This cooperation among the export credit institutions will be achieved through – amongst other measures – encouraging the development of investment and export credit insurance in member countries; offering technical assistance to establish new agencies and to enhance the insurance capacity for existing agencies; and developing a credit information agency, debt collection agency and training centres.
The union currently has two multilateral members (ICIEC and Dhaman), as well as 14 ECA members: Algeria’s Cagex, the Export Credit Guarantee Company of Egypt, Indonesia’s Asei, the Export Guarantee Fund of Iran (EGFI), the Jordan Loan Guarantee Corporation, the Lebanese Credit Insurer (LCI), the Exim Bank of Malaysia, the Export Credit Guarantee Agency of Oman, Senegal’s National Company for Credit Insurance and Guarantee (Sonac), Sudan’s National Agency for Insurance and Finance of Exports (NAIFE), Sudan’s Shiekan Insurance and Reinsurance Company, Tunisia’s Cotunace, the Turk Exim Bank and the Export Credit Insurance Company of the Emirates.
During the two-day gathering of Arab and Islamic ECAs in Beirut at the end of October last year, workshops were hosted in which senior executives from the member ECAs discussed their activities and developments within their organisations.
GTR: Generally speaking, how have the Aman Union members fared in terms of business in the last 12 months?
Taha: 2008 was definitely a difficult year for most ECAs of the Aman Union due to the stagnation in economic growth, higher claims, lower recoveries and a very challenging operational environment.
However, business insured by Aman Union members increased from US$9.17bn in 2007 to US$11.93bn in 2008 – though this was mainly due to the price inflation of goods and services covered.
On the other hand, the premium stagnated at the level of US$75mn.
As far as claims and recoveries are concerned, in 2008 the claims figure was reported to have increased from US$15.7mn to US$31.5mn. In the same period, recoveries decreased from US$8.3mn to US$4.9mn.
2009 is expected to be a difficult year due to the effect of the global financial and credit crisis resulting in a reduced credit quality of buyers worldwide.
GTR: How have Arab and Islamic ECAs adapted to and dealt with the crisis?
Taha: Without doubt, all the delegates at the gathering in October felt satisfied that the meeting had provided them with an excellent opportunity to discuss the different challenges they are facing in the industry. It also provided them with a unique platform to reinforce their cooperation and further develop their business relationship.
In the implementation of their respective mandates, the participants all realised that they have been constrained tremendously by limited underwriting capability, lack of credible credit information and the difficulties in accessing to international reinsurance facilities.
Other issues that were raised in the meeting were the low recovery of paid claims, lack of domestic insurance infrastructure, tough competition from the international private political risk insurers and last but not least, the sky-high cost of IT in the industry.
The overall steady growth of ECA activities in OIC member countries is not commensurate with the level of business and premium income. It is still very low comparatively to the international level.
The lack of awareness about the concept of export credit insurance, the lack of adequate credit information and the difficulty in accessing the international reinsurance market were identified in the meeting as the main reasons for the low level of business and premium income in member countries.
A final consensus has been achieved in that all the delegates recognised that the close cooperation among OIC and Arab ECAs is the most effective way to face all the above problems and to enhance their performance to better serve their economies. Thus, the creation of the Aman Union is hoped to serve this purpose well.
ICIEC forges ahead
The Jeddah-based ICIEC achieved an important landmark in October 2009 when it was accepted as a permanent member of the Berne Union.
In addition to this, the corporation has initiated several strategic actions aimed at developing its scope of business during the last year. In this regard, new products are being studied, and new amendments to the articles of agreement were approved, says Abdel-Rahman Taha, chief executive officer of the ICIEC.
“In terms of products development, the ICIEC is currently working on revamping the bank master policy to make it more flexible to attend banks needs. Other products like sukuk and performance bond insurance are under consideration and will be presented to the board if these products are deemed to be feasible,” says Taha.
He explains that under the new amendments in the articles of agreement, the ICIEC is now changing it operations’ regulations to allow the corporation to insure domestic sales as a portion of policyholders’ total sales. ICIEC is also presenting new regulations to enable coverage of capital goods imported from non-member countries. Taha adds that it is expected that these changes “will have a positive impact on the corporation’s future business”.