The impact of the pandemic has not yet increased the number of export credit insurance claims paid in the first half of 2020. However, insurers will see claims climb towards the end of the year, according to new research by the Berne Union.

The expected spike in claims due to the pandemic is yet to be realised, finds the research, based on the business activity of Berne Union members, which include government-backed export credit agencies, private credit and political risk insurers and multilateral institutions around the globe. In fact, export credit claims paid in the first half of the year were 16% lower overall than the same period last year.

For medium and long-term (MLT) business in H1, claims paid by public and private insurers declined by 25% and 72% respectively when compared with the same period in 2019 (figure 1). When it comes to short-term (ST) claims paid, public insurers recorded an increase of 18% and private insurers a reduction of 19%.


Figure 1: MLT claims paid H1 2020

This drop in claims payments can partially be attributed to a decline in new commitments during the same time, largely attributed to a general decrease of exports, the report adds.

In April, the WTO warned that global trade volumes could decline by as much as a third this year because of the pandemic.

Public insurers’ new MLT commitments have decreased by 20% (figure 2), with private insurers seeing a slightly larger drop (26%). In ST export credit insurance policies issued, public insurers recorded growth of 8% while private insurers’ business fell by the same amount.


Figure 2: New MLT business H1 2020

“The fact that we have not yet seen a significant increase in claims payments is in large part due to protection afforded by various forms of fiscal support from governments as well as by the quick reaction of lenders and insurers in restructuring deals when necessary,” says Berne Union president Beatriz Reguero. “The consensus amongst the industry is that we can expect to see a more obvious change in claims trends towards the end of the year.”

A few months into the year, and with the effects of the pandemic taking their toll on businesses, governments quickly rolled out support for their exporters, these packages take the form of liquidity options, payment deferrals and insurance schemes.

The UK government, for example, launched state-backed “bounce back” loans aimed at supporting firms hit by Covid-19. Businesses were free to apply for loans from lenders accredited by the British Business Bank from May 4.

In Germany, state-owned development bank KfW rolled out an instant loan scheme in April to provide fast and targeted loan assistance to enterprises with more than 10 employees. Applications for the loans are submitted to banks, with KfW assuming 100% of the credit risk, having received a guarantee from the German government.

In July, EU leaders agreed on a €750bn recovery effort to help tackle the economic crisis caused by the Covid-19 pandemic, €390bn of which will be distributed in the form of grants, with the remaining €360bn earmarked for loans to facilitate member states’ recovery.

But measures such as these are expected to be tapered down and brought to an end.

“The transition away from state support, both for exporters and the private market, requires very careful management and creative and flexible approaches from all players to avoid disruption,” says Berne Union secretary general Vinco David. “This is something we will be looking at through the remainder of this year as many of the support schemes approach their provisional end dates.”

Elsewhere in the insurance industry, Lloyd’s of London says it will pay out £2.4bn in pandemic-related claims for H1, after reinsurance recoveries. In September, it reported a loss of £400mn for the first half of the year compared with a £2.3bn profit for the same period last year. Lloyd’s chief executive John Neal describes the first half of 2020 as “exceptionally challenging”.