The Saudi Export-Import Bank (Saudi Exim) and Allianz Trade have struck a tentative deal to provide credit and political risk insurance for exports to Saudi Arabia.

Under an initial framework agreement signed in London on May 29, Allianz Trade will act as a fronting insurer for non-oil exports to the kingdom by covering the non-payment risks borne by international financial institutions and companies. Saudi Exim will act as reinsurer.

The commercial details of the deal, which was brokered by Howden, are not yet finalised, Allianz Trade says.

Asked about the potential value of the agreement, the trade credit insurer tells GTR: “All our coverages are assessed and delivered depending on the financial profile of each obligor, on a case-by-case approach. So the value of trade that can be covered through this partnership will depend on the nature of the transaction tenure on which we will be asked to insure.”

Saudi Exim is a relatively new entrant to the export finance landscape, having launched in 2021.

The government-owned bank is focused on boosting the role of non-oil sectors of the economy, including SMEs. As of October 2023 around 80% of the firms in the lender’s portfolio were in the industrial sector, and around 40% were SMEs.

Saudi Exim’s CEO Saad Al-khalb says in a statement that the bank “is keen to work with external partners to unlock supply chain financing and investment from the global financial markets, and enable them to capitalise on the opportunity presented by [Saudi Arabia’s] National Industrial Strategy while benefiting from our support”.

The kingdom’s national industrial strategy is aimed at expanding manufacturing capacity in the country, which has traditionally depended heavily on the oil sector for economic growth.

Al-khalb adds: “This agreement opens supply chain bridges from over 50 countries where Allianz Trade Group has a presence, to the benefit of Saudi’s growing manufacturing sector and increasing the level of attractiveness of the Kingdom of Saudi Arabia as a hub for manufacturing worldwide.”

Howden CEO David Howden says: “The unrivalled expertise of the London market has been critical in developing these ground-breaking insurance arrangements.  It’s yet another demonstration of the important role that insurance plays in underwriting the global energy transition.”

Saudi Exim also offers its own insurance products to Saudi exporters and financing banks, and in 2022 signed a US$138mn reinsurance deal with the Islamic Corporation for the Insurance of Investment and Export Credit to help cover its risk on export insurance.