An armchair view

Swedish export credit agency EKN waved goodbye to its director-general, Olof Rydh, recently. GTR asked Rydh to look back at the market he has served in for over seven years.

Olof Rydh served as director-general at Sweden’s export credit agency (ECA) EKN for just over seven years until he retired recently. He held quite a few jobs in the public as well as in the private sector, namely state secretary in the Swedish ministry of industry, CEO in a couple of investment companies and director-general at the Swedish Geological Survey.

GTR cornered him for one last market viewpoint before he heads for the quietude of his armchair!
No great problem

In the last five to six years, we have seen a nice growth in the world economy in general, comments Rydh. There have been very few economic crises in countries/regions and where they have appeared, they have caused only very small problems, at least for EKN, he adds. “Losses have been minimal and we have even been prepaid huge amounts on our demands.”

“We have seen a fast expansion in demand for goods where we have a very competitive industry in Sweden,” he goes on. “Good examples are found in telecoms, construction equipment, trucks, buses and power transmission. On top of that we have noticed quite a lot of exports of defence materials. These are among the sectors that have generated a great demand for EKN guarantees.”

Incidentally, EKN offers only guarantees in support of Swedish exports. By giving guarantees for export credits as well as for different kinds of bonds, EKN takes risk on both foreign buyers and Swedish exporters.

Rydh says there’s been a growing demand for guarantees for exports to new and mostly more risky markets. Up until now indemnifications have, however, been almost non-existent. EKN issued guarantees for Swedish exports to over 100 countries last year.

EKN also met higher demand for guarantees for exports to newcomers in already established and competitive markets. An example of this is in the telecom market where EKN for several countries meets demand for coverage with regard to exports to the fourth or fifth operator.

Also of great importance is that EKN now has a full range guarantee assortment for small and medium-sized companies. This programme is just starting up and is expected to give EKN a huge amount of new customers and be of great importance for many Swedish SMEs, says Rydh. “Unfortunately, to a great extent these efforts are limited by the decision in the EU that prohibits us from issuing short-term guarantees for export to more developed markets,” he adds. “These markets are the most important ones for smaller companies with limited experience in exports.”


Accepting fate

Rydh remains optimistic in the short run for his former employer. “EKN has been in business for more than 70 years and I think there will be a need for our kind of support also in the (near) future,” he says. “But in the longer run I see ECAs slowly fading away as economies become more stable and private insurers take over. And that is the whole idea, isn’t it”.

Well, it is the idea for many state-backed ECAs, but not all. Some, like Canada’s EDC for example, are extremely commercially-minded and have no intention of withering away. EKN in the meantime is happy to more than break even. Rydh comments: “We have now been profitable for several years and nobody has complained. Reserves are being built up for harder times that may or may not come. We calculate the risks and set our premiums on a long-term break-even basis and I think that is already rather commercial. According to my experience, we can manage with this concept; what’s important is that we do and live by correct risk assessments.”

He adds: “In Sweden EKN lives under very favourable conditions. We are given some regulations by our government, but EKN makes its own decisions. The minister responsible is not allowed to interfere in our business. Our decisions can’t be appealed against.

“So, for EKN the challenge is – as for private companies in the industry – to understand the market and customers’s needs and find ways to meet them. It’s a matter of internal competence and organisation.”

EKN has not had much contact – and so far no competition – from private insurance in Sweden or elsewhere as “we up until now work in different market segments. But, as mentioned earlier, I’m convinced that private insurers will expand into ‘our’s markets. However, it will take some time.”

Rydh adds that he experienced no specific problems with private insurers that carry out (long- term) state business. Sometimes he found their decision-making process a little slow, but that was not so problematic and could be handled when there were common guarantees involved.

He does emphasise the very good cooperation with private reinsurance companies. EKN started several years ago to reinsure political as well as commercial single risks and portfolios. “This is of great value to EKN and our customers in that it has made it possible to expand our business to an extent that would otherwise not have been possible,” he says.

And as far as the concept of a multilateral ECA for emerging markets, “there might be some benefits in a ‘Miga concept’s to support relevant kinds of exports from companies in some emerging countries. To a large extent it would be an emerging market-to-emerging market business.”

Rydh is succeeded by Karin Apelman, formerly CFO at Swedish Airports and Air Navigation Services (LFV Group).