It’s a huge market with vast amounts underwritten each year. But we don’t really know too much about the true size and profitability of the credit and political risk insurance market globally, argues Robert Svensk.

It is estimated that the specialist underwriters of export credit and political risk insurance (ECPRI) write upwards of US$1.35bn per year of premium and have outstanding liabilities of 100 times that amount – largely in the emerging markets. With the exception of two underwriters, the fact of the matter is that no one really knows for sure what the true size and profitability of this class of insurance is, either as an industry or for an individual underwriter.

The traditional credit insurers – Euler, Atradius, and Coface – now produce extensive annual reports that set forth most, but not all, of the information that an insured and its broker should want to know about the underwriter that is assuming its credit and political risks.

The official export credit agencies (ECAs) have, over the years, become much more transparent in their reporting as well, notwithstanding the fact that deciphering government reports and accounting can be tedious at best and obfuscating at worst.

The transparency of the multiline insurers that underwrite this class of insurance leaves much to be desired, however. AIG, various Lloyd’s syndicates, Zurich, Axis, Chubb, QBE and the other specialist underwriters produce virtually no public information on their ECPRI operations, believing that a quick look at their corporate financials is sufficient information for their policyholders.

Before buying a credit or political risk policy from a particular underwriter, an insured should ask questions on the 10 following aspects of their underwriter’s business. This information will tell an insured a great deal about an underwriter’s commitment to the business and how they might react when faced with significant claims.

Simply knowing what the corporate credit rating and size of the insurance group issuing your policy might be is not a perfect indicator of the underwriter’s skill or commitment to the ECPRI business.

What should you know

1.  What is the gross written premium (GWP) for the underwriter’s export credit, domestic credit and political risk insurance books for the past five years

  • This will provide some insight into whether they are a market leader or a market follower and whether they are writing aggressively or pulling in their horns. This information, in turn, will give further insight into the pricing and terms of coverage they might offer – and whether the terms you have received from them are the best the market has to offer.

    In estimate of GWP for the leading underwriters is provided in the box below and is based on interviews with brokers, reinsurers, underwriters, and published material. Except for Sovereign and Exporters, the figures for the specialist underwriters are highly speculative.

2.  What is a similar breakdown for net written premium (NWP)

  • The difference between GWP and NWP is how much your carrier reinsures and how much it retains net for its own account. A very large net loss can quickly discourage an underwriter from remaining in the business. An underwriter that is overly dependent on reinsurance is vulnerable to the whims of the reinsurance market – not only resulting from their experience in the ECPRI class of reinsurance, but for all classes of insurance. A truly bad hurricane season or another 9/11 can have a meaningful impact on an underwriter’s ECPRI capacity.

3.  Who are the underwriter’s principal reinsurers

  • Who is the lead reinsurer(s) and how large a percentage are they assuming
  • Are the reinsurers creditworthy
  • How might they respond to a large claim
  • Reinsurance recoverables are one of the trickiest issues around. A primary underwriter may be forced to deny liability or stall payment until he is certain that his reinsurers will respond.

4.  What does the underwriter’s country portfolio look like

  • Is it well balanced
  • Does it have excessive exposures in a few highly risk countries
  • Is it regionally out of balance
  • An extremely large exposure in a particular country (remember Argentina in 2002) or a particular region (Latin America in 1982) can result in an underwriter’s complete withdrawal from the market or a very hard-nosed approach to settling claims.

5.  Similarly, what does the underwriter’s portfolio look like from an industry or sectoral perspective

  • Would a significant drop in the price of commodities, or a complete meltdown in a particular industry (remember telecoms in the late 1990s) have a significant loss impact on that underwriter’s results
  • Further, a portfolio skewed towards export industries will fare much better in difficult economic times than one concentrated in imported consumer goods.

6.  What is the average tenor of the underwriter’s portfolio

  • A long-term portfolio can restrict an underwriter’s ability to quickly adjust its portfolio to changing economic and political trends. On the other hand, it demonstrates a long-term commitment to the business and can add significant stability to an underwriter’s profits.

7.  What has been the longer term profitability of the underwriter measured in terms of its loss ratio and expense ratio – collectively their combined ratio

  • No one will continue in the business if the combined ratio over the long term is negative. Further, a deteriorating loss ratio will be reflected in how the underwriter handles its claims and its pricing.

8.  What are the underwriter’s maximum per risk and per country limits

  • What is their average outstanding per obligor exposure
  • Will one large bankruptcy put their program in jeopardy

9.  What has the underwriter’s loss experience been

  • What is the number and value of total paid claims
  • Have they been successful in their recoveries
  • How many claims have been denied
  • Have gone to arbitration
  • Claims can be denied for valid reasons and frequent denials can mean that the policies offered by the underwriter do not reflect what the insured believes it is buying.

10.  Is the subsidiary of an insurance group that is issuing your policy backed by the full faith and credit of the group

  • The credit rating of the actual issuing company may be different than the credit rating for the group as a whole or for one of its larger subsidiaries.


Over the years, many underwriters and Lloyd’s syndicates have come and gone from the ECPRI marketplace. While the market may be more stable from a capacity point of view today and there are certainly more players involved, we should keep in mind that many of the early market leaders of the 1980s are long gone, that Lloyd’s syndicates enter and leave the business with some regularity, that ECAs are subject to their government’s budgets and whims, and that certain of the traditional underwriters have undergone significant ownership and programme changes over the past decade.

Transparency is being encouraged in all areas of business. Smarter buyers are better buyers – of financial services as well as hard assets – and those underwriters that become more transparent in reporting their operations will stand to benefit thereof.


Specialist Principal 2006 premium
underwriters domicile (US$mn)
Axis Bermuda              260
AIG New York              250
Lloyd’s London              250
ACE Bermuda              100
Zurich Washington DC              100
Chubb New York               60
Sovereign Bermuda               60
Unistrat (Coface) Paris               50
Atradius (London) London               50
FCIA New York               35
Hermes (Euler) London               30
Lancashire Bermuda               25
Exporters Bermuda               21
Houston Casualty New York               15
Liberty Mutual London               10
Catlin Bermuda              10
Total specialist underwriters            1,326


Traditional   2006 GWP
underwriters Domicile (US$mn)
Euler (excl Hermes MT) Paris            2,158
Coface (excl Unistrat) Paris            1,348
Atradius (excl London MT) Cologne            1,370
CyC Spain Madrid              476
QBE Australia Sydney              213
Total traditional underwriters            5,566


    2006 Premium  
Major ECA’s Country (US$ millions)  
OPIC USA               25
Eximbank USA               37
MIGA IBRD               53
SACE Italy              317
CESCE Spain              270
EKN Sweden              232
OND Belgium              181
ECGD UK              169
EDC  Canada              136
NEXI (2005) Japan               82
EKF Denmark               55
FEC Finland               46
OeKB Austria               41
COSEC Portugal               39
GIEK Norway               25
CGIC SoAfrica               17
EFIC Australia                7
ASHRA Israel               20 Est.
China ECA China               60 Est.
LatAm ECA’s Various               20 Est.
ROW ECA’s Various               50 Est.
Total ECA Premium              1,883


    Est. 2006 GWP % of Total
Underwriter   (US$ millions) Market
Specialists            1,326 15.1%
Traditionals            5,566 63.4%
ECA’s            1,883 21.5%
Total              8,774 100.0%