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Export credit agencies and commercial trade credit insurers have celebrated an “exceptional” year for some key product lines, but are also experiencing a sharp rise in claims from customers, newly released data shows.

New short-term trade credit insurance business rose 6% year-on-year to US$2.8tn in 2023, while medium and long-term (MLT) business shot up by 40% to US$165.4bn, according to a snapshot of full-year 2023 data released by the Berne Union on April 25.

Last year saw the biggest growth in MLT business since 2015, fueled by “a particularly strong year” for export credit agencies (ECAs) and robust manufacturing and infrastructure sectors, the Berne Union says. The association represents investment insurers globally, largely consisting of ECAs and private insurers.

New domestic business rose by 18% during 2023, according to the figures, while cross-border credit insurance products not tied to trade jumped by just under a third to US$81bn. New political risk insurance business dropped by 4% to US$40.8bn.

“2023 has been an exceptional year for the export credit industry,” Berne Union president Maëlia Dufour says in a statement.

“The business results reported by Berne Union members demonstrate huge growth in volumes with a skyrocketing acceleration in support for energy and climate transition as well as an increasing demand for strategic, untied and domestic products.”

The association’s members committed US$20.5bn of support to renewable energy projects during 2023, a new record and double the volume of 2022.

ECAs typically provide financing support for renewable energy projects through direct guarantees to exporters or indirect support through their lenders.

ECAs in some countries have been heavily criticised by campaign groups for being key conduits of public subsidies for the fossil fuel industry, and data released earlier this month shows that while support for sectors like oil and gas is ebbing, ECAs continue to provide them far more backing, in value terms, than renewable energy.

But the Berne Union estimates that a further US$98bn of support was committed by all its members – including commercial providers – to wider “green, climate and energy transition-related transactions” last year, which it says are “a significant portion” of MLT business and political risk insurance.

ECAs and trade credit insurers also have a strong appetite to boost activity tied to the energy transition. Berne Union members respectively nominated “green/transition” and “renewable energy” as the first and second greatest opportunities for their business, followed by new supply chains and support for SMEs.

Reflecting the ongoing war in Ukraine and a combustible conflict in the Middle East, members ranked geopolitical risk as the top potential threat to their business, followed by a global economic slowdown, the impact of conflicts and emerging market debt crises.

 

Warning on short-term claims

Despite the healthy growth seen across most product lines in 2023, providers were hit with a record number of claims by policy and guarantee holders.

Non-payment claims across all types of cover shot up to an “historic high” of US$8.9bn, a 24% jump compared to 2022. The rise was fueled by MLT political claims in the first half of 2023 “following a distressed period for sovereign debt”, with the overall MLT claims ratio now at 80 basis points.

A total of US$5.1bn was paid out in MLT claims in 2023, significantly higher than the pandemic high of US$4.2bn in 2021, and reversed the stabilisation in claims seen in 2022.

The Berne Union had foreshadowed an uptick in political MLT claims last year, following a series of sovereign bond defaults in 2022.

While political claims across all product lines leapt by US$1.3bn, the association says that claims returned closer to normal levels in the second half of 2023.

Meanwhile, claims against short-term revolving policies are expected to remain elevated. They grew by almost a quarter in 2023, meaning the value of claims outpaced the value of new business during the year.

“With 14 members reporting an increase in pre-claims situations for their [short term] revolving business, a difficult period ahead for corporate clients could put further stress on this rapidly expanding business line,” the Berne Union says.

Non-political claims in MLT products continued to show improvement, largely thanks to stabilisation in the transport sector, dominated by the aviation industry, which broadly returned to profitability in 2023 following the turmoil of the Covid-19 pandemic.

The Berne Union released the data following a spring meeting in Oslo, hosted by Norwegian ECA Eksfin.

At the meeting, members voted to upgrade Credsure, HDI Global Specialty and Ukraine ECA to full members of the organisation from their previous observer status.

On the sidelines of the event, ECA representatives from the Quad nations Australia, India, Japan and the US signed a memorandum of co-operation, committing to work together on “supply chain resilience, critical technologies and emerging technologies” and climate and infrastructure in the Indo-Pacific.

The foursome pledged to co-operate on finance availability and credit guarantees and insurance for trade and projects in the region, while ensuring “our own export financing, credit guarantees and insurance activities are undertaken in a responsible and sustainable manner”.

The Quad alliance has previously foreshadowed closer co-operation aimed at curtailing China’s dominance of critical mineral supply chains, including by boosting production in Australia.