The pandemic has underscored the importance of credit insurance as a risk management solution for exporters and financiers alike, but getting policymakers to recognise the vital role it plays in supporting the real economy remains a challenge. Eleanor Wragg reports.


The European Commission will soon table the legislative proposal that will implement Basel into European law, and unless the credit insurance industry can make its voice heard it will no longer be economically viable for banks to insure better rated credit risks, which could lead to insurers pulling out of the business line entirely. According to the International Trade and Forfaiting Association (ITFA), this could put approximately €600bn-worth of support to the real economy at risk.

Last year, ITFA contracted Hume Brophy – a Brussels-based consultancy specialised in European public affairs – to lobby policymakers and regulators to consider credit insurance in the context of Basel implementation.

GTR spoke to Lucie Binová, head of financial services at Hume Brophy, to learn about the progress being made.


GTR: Why did ITFA choose to partner with Hume Brophy?

Binová: ITFA’s brief was very clear in that they wanted to make sure that credit insurance was being considered in the context of Basel implementation. We are acting as an interlocutor between industry and the policymakers, and our task is to make sure the messages are conveyed in the manner that is palatable to the policymakers and that hopefully raises awareness of the issues.


GTR: What approach have you taken?

Binová: We are holding discussions with policymakers from the European Commission, EU member states’ governments, parliamentarians, and regulators. We want to make sure they understand the importance of credit insurance, because while the product itself might be very niche, it has vast consequences for the real economy.

We are at a juncture in Europe where we want to understand where we are headed. Europe wants to be more assertive and competitive on the global stage, and products such as credit insurance can be very helpful in this regard.

The financial services regulators naturally focus on risks. They need to understand how the product works and if there are risks that are posed for financial stability. When several sectors are involved the regulators will always be concerned about the potential spill-over effect, which could increase the systemic risk. We really have to go into fine detail in these discussions, and this is where the ITFA research and expertise of the members comes into play.

Having said that, the consequences of overlooking credit insurance manifest themselves in various sectors, so we cannot address this issue only by talking to people responsible for financial regulation. It is the role of the governments and other policymakers to see the big picture, broader national and EU interest. Therefore, we are also talking to ministries, various industry bodies and representatives of various sectors.

The policymakers will hear the message even more if the ITFA members and other industry players can co-ordinate their voice when performing their advocacy actions.


GTR: How much progress have you made so far, and what are the challenges?

Binová: Advocacy work is a long-term process, and it takes time to explain the issues, because the policymakers we talk to have many other topics to deal with. Covid-19 has hit us all, and circumstances now are very different from a year and a half ago. Policymakers are reconsidering how to implement the standards for the best in order to reflect the conditions that we are living in now.

Fortunately, the financial industry is not the source of frustration it was during the global financial crisis. Now, policymakers are looking to the industry for help to support the real economy. We see this as an opportunity. We have their ear, so we need to be spot-on when explaining how credit insurance helps, and what the consequences are if supply chains and trade finance and credit insurance are distressed, and what could happen if we no longer have products at hand when we need them. Public resources are limited, and we continue to need a functioning private credit insurance market in order to support international trade and the real economy.

In terms of the progress with Basel implementation, we see that it’s really important to continue the work and continue discussing with the European Commission, because if we are not telling our story, somebody else will be telling their own story instead. This is also about competition between many interested parties.

One challenge for us is that the European Banking Authority (EBA) published an opinion in the spring calling for the implementation of the final Basel III framework as agreed by the Basel Committee on Banking Supervision, which we felt didn’t take into account the whole picture. We have numbers from a KPMG study and from the study conducted by the ITFA insurance committee that provide more information, and we would like to present these to them. We have a solid message and very important data to convey, which should be part of the EBA’s consideration.

We have already heard from several EU member states that, provided we are able to deliver the data and make it clear that there is no additional risk for financial stability, they will be willing to look into making sure that credit insurance can function into the future. Now, we need to get the message across to the European Commission and the EBA.


GTR: What happens if the EBA says no? What is your plan B?

Binová: Advocacy is about flexibility and adjusting the messaging. Our preferred outcome is that when the Commission proposal for Basel implementation comes out, it reflects the importance of credit insurance. But even that would not be the end of the story. We will still need to make sure that the topic is not lost in negotiations, because you may have an excellent Commission proposal, but by the time the member states and parliamentarians have had their input, it is very difficult to make sure the proposal holds together as originally foreseen by the Commission.

If, however, the EBA says no, we will of course keep talking to the member states. The EBA’s role is to focus on stability and risks. Politicians and policymakers are the ones who look at the broader picture. They have to take into account societal elements and industrial development, so their remit is much broader. Therefore, we would keep talking to the member states to explain why they need credit insurance at the national level. At the policy level, we would keep talking to the European Commission, supporting them with the numbers and arguments until we come to a mutual agreement on the solution. We would organise events and workshops for policymakers where they could ask questions to the industry, and bring together other parts of the commission that are responsible for small and medium enterprises and sustainable trade, because all of that is supported by credit insurance.

It sounds relatively boring because it’s a bit repetitive, but it’s about acting upon the feedback from the policymakers and adjusting the messages as the process continues. We take into account new developments and opinions from the industry, from the EBA, from the Commission, from the member states. When they ask us questions, we need to provide them with answers. We have to be able to have a dialogue. We have to follow up, we have to be trustworthy, and we have to be consistent to be credible and that’s how we achieve our outcome of making sure the product is understood and respected and regulated in a way that is beneficial to the wider economy.

For successful advocacy, it is really important to stay focused and not get frustrated by interim obstacles. Advocacy is about human interaction and communication, and sometimes people simply don’t react as you would have wished for them to react. It’s not red carpets and wine. It is systematic work. You need to know the issue and understand the perspective of the regulators and policymakers. If you work hard then the results will come.