Members of the Berne Union and of the International Credit Insurance and Surety Association (ICISA) expect a mixed 2016 for trade credit insurance, with growth in premium income and insured turnover, but increases in claims and insolvencies in almost all regions.
In a joint survey conducted by the associations, both private insurers and export credit agencies (ECAs) reported positive trade credit insurance results in 2015, with an increase in the number of policyholders in most regions, and particularly Europe, Mena and Asia – a trend that is expected to continue into 2016. They also noted an increase in premium income in Europe, North and Latin America.
Claims and insolvencies were “stable to negative” in 2015, with more claims in Europe, Mena and Latin America (mainly Brazil). Claims are expected to stabilise in Europe and Africa in 2016, though the outlook in Latin America is mixed and the situation in Asia is expected to deteriorate.
Meanwhile, insolvencies are expected to grow in all regions in 2016, particularly in Asia, Australia, Europe and Latin America.
Overall, the increased complexity of the trade risk landscape is good news in terms of demand for insurance, with exporters and banks hoping to make their transactions more secure.
Among the risks noted in the current insurance landscape was a rebound in fraud cases. “One of the reasons [for the increased fraud] is that our members have more and more exposure in China, although fraud is prevalent in other markets as well. Fraud can include fake invoices, bills of lading for non-existent transactions, etc. The challenge for the underwriter is that nowadays, technology makes it easier for fraudsters to create the illusion of a legitimate, professional company,” Robert Nijhout, executive director of ICISA, tells GTR.
We see increased co-operation between ECAs and private insurers, often with private members reinsuring ECAs. Kai Preugschat, Berne Union
The joint survey was also an opportunity to highlight the increased co-operation between government-backed ECAs and the private sector.
Kai Preugschat, secretary general of the Berne Union, explains: “We see increased co-operation between ECAs and private insurers, often with private members reinsuring ECAs. Private insurers have the advantage of the untied nature of their products, whereas ECAs are tied to the specific rules of their respective mandates. Of course there are still markets and segments where private insurance is lacking for a variety of reasons. Take Iran for example: we hear a lot about ECAs reopening lines, but there is a lot less hurry coming from the private market.”
According to Nijhout, private insurers are unlikely to start doing business in Iran at least until the US elections have passed and the future of the country’s sanctions on Iran is clearer, as too many of them have US interests.
However, he notes that the demand for longer tenors, which are now offered by the private market, mostly thanks to reinsurance, means that ECAs and private insurers can now collaborate more closely on creative solutions to share risk.
Survey respondents identified Africa as one of the most promising regions for the development of the insurance market in 2016: “One of the biggest signs that trade is becoming more mainstream in Africa is the fact that further countries are now setting up ECAs or export-import banks, like Ghana for example,” Preugschat tells GTR.
But for private insurers, obtaining licences to operate on the continent remains an obstacle. “This takes time, and they need to set up information systems, depend on (non)-existing insolvency legislation, ways to collect money, etc. But like many other industries, the insurance sector is under huge pressure to grow and Africa presents opportunities,” concludes Nijhout.