Regulatory shifts and market trends: Insights from Spain

At a WTW-hosted roundtable in Madrid, leading banks and insurers looked ahead to 2025, discussing key trends such as regulatory uncertainty with Basel 3.1, the shift toward developed markets and the growing significance of ESG. As the industry faces new product opportunities and evolving client demands, participants focused on how to do business in a dynamic landscape, close the global trade finance gap, and embrace technology to enhance risk management for the future.

Roundtable participants:

• Marilyn Blattner-Hoyle, global head of trade finance, trade credit and working capital solutions, Swiss Re Corporate Solutions
• Alberto Carrion, executive director, private debt mobilisation, Santander Corporate & Investment Banking
• Cruz Gonzalez, global head of receivables and supply chain finance and lenders solutions team leader Europe, WTW
• Chris Hall, global head of financial institution sales, credit and political risk insurance, financial solutions, WTW (chair)
• Santiago Herrero, head of political risk, credit and bond, Iberia, AXA XL
• Sofia Spiers, head of GTB distribution, BBVA
• Caroline Tran, regional product leader Continental Europe, global political risk, credit and bond, AXA XL

Hall: Welcome, and thanks for joining us. Over the years, we’ve held several of these roundtables, in London, New York and online, and now, for the first time, in Madrid – a key hub for credit and political risk insurance and finance.

When I think back on past discussions, certain trends continue: geopolitical instability, conflicts in Europe and further afield, and interest rates that haven’t dropped significantly. Trade finance remains strong, M&A activity is up, and bond issuances have recovered from previous lows. There’s been a lot of turmoil and flux. Banking and insurer exposures remain largely skewed toward developed markets.

With that context, my opening question is: what has 2024 been like for you so far? Does any of this resonate, or do you see something different happening?

Spiers: I see several key themes for 2024. The biggest one is regulatory uncertainty, especially around Basel 3.1 implementation, which has taken up a lot of focus for banks. While interest rates are coming down, they haven’t dropped as fast as expected, and we’ve also seen some trade volume compression. This shift has led some net sellers to now seek assets, creating opportunities for newer distributing banks to carve out a space. As you say, there is still a strong focus on developed markets, which hasn’t reversed yet. This leaves a financing gap, driving changes in structures to address it.

Carrion: I agree with Sofia. We’ve been focused on two areas. First, the ‘business as usual’ approach – continuing what we’ve done in recent years but on a larger scale and in a challenging environment. However, this year the industry has seen fewer assets than expected in trade finance. There’s a lot of market liquidity and oversubscription, with everyone chasing the same type of assets. This has led to lower volumes.

Second, we’ve shifted focus to developing new solutions, particularly in credit insurance. We’re exploring new products, geographies, borrowers and structures. This is also driven by regulatory changes like Basel 3.1, as we’ve spent the year anticipating its impact and adapting to continue supporting our clients.

Gonzalez: The uncertainty has created a bit of a standstill for clients, but like Alberto said, business as usual continues while we work on developing new structures and solutions. We’ve seen new approaches emerge, which has led to more conversations.

On portfolios, there’s a growing trend towards portfolio structuring, which benefits both sides – introducing new asset classes and solutions for credit insurance, while centralising distribution and reducing operational risk.

We’re seeing more diverse portfolios, from single asset classes to multi-asset portfolios, including short-term receivables, project finance and surety. The criteria and structures vary, but there’s more participation from insurers now than before. The insurer market is adapting alongside the banks, and we hope this trend continues.

Herrero: I completely echo what the banks and Cruz have said. We’ve seen a noticeable shift in recent years, particularly in Spain and Iberia, from the traditional focus on export finance and working capital – still key in Spain – toward more structured and project finance. There’s also a growing hybrid approach, combining export and project finance, where export credit agency (ECA) tranches work alongside commercial tranches to support large-scale deals. We’re active on both sides, whether in the ECA or commercial tranches.

While typical export trade finance with buyer credit and commercial loans often target developing economies – like Sub-Saharan Africa – we’re seeing our portfolio increasingly focused on developed economies.

Blattner-Hoyle: Since you’re all in Madrid, I wanted to highlight a shift in team and client dynamics. Insurance centres are expanding beyond the usual hubs like London, New York and Singapore. WTW is a great example, with your hires in Madrid, and introducing new clients we hadn’t seen before. We also now have three team members there.

In terms of products, I echo what Santiago, Alberto and Sofia said about the shift toward developed markets. Letter of credit (LC) business in emerging markets remains stable, but we’re seeing more investment-grade, developed market corporate risks being bound. This is often driven by capacity needs.

One standout trend has been the auto sector. With the geopolitical and industry challenges automotive companies face, there’s been a notable interest in financing in this sector to support ESG-connected adaptation and sharing the risk of that journey. We underwrite the sector carefully since the challenges may be insurmountable for some.

So far we don’t see any anti-selection with this auto peak, but rather as banks supporting the industry’s progress.

Spiers: One key point that comes to mind is ESG. It’s driving positive change, both in sector and client mix. Banks are increasingly financing newer players, either through incubation hubs within their groups or by supporting established corporates involved in the transition. This is reshaping structures, client relationships and sector focus.

Carrion: I agree. The bank is supporting core clients globally through their transition, and not just in my division – it’s a comprehensive effort. While we continue to help consumers with traditional needs, we have teams focused on evaluating emerging technologies and supporting newly established companies in this space. Our goal is to help our clients navigate the transition.

Hall: Is there anything on the horizon for the rest of the year that stands out? Any significant product developments or client demands that might help close that final revenue gap?

Carrion: In our case, we’re focused on completing the capital exercise for the year, and that’s nearing completion.

Herrero: From the AXA XL perspective, we’re primarily focused on project finance, typically offering up to 20-year tenors with a maximum line of US$150mn. Recently, we’ve been challenged by client banks asking for even longer tenors. AXA XL political risk, credit and bond is actively looking to improve our offering to meet this demand, as there’s clearly a market for longer-term financing, and some competitors are already operating in that space.

On the credit side, we are seeing banks testing products to see if they can get risk mitigation. It’s not always about capital relief – sometimes banks simply want to manage their balance sheets or offload specific risks they prefer to mitigate.

Hall: It would be remiss not to mention the growing US$2.5tn trade finance gap. How is that being addressed? We’ve been focused on developed markets, yet as Marilyn noted, LC volumes remain steady, which is often driven by emerging markets. Are we, as a market, closing that gap, or does it raise a broader, existential question?

Blattner-Hoyle: Africa is perhaps a good example. Despite the growth and opportunities there, it’s one of the most challenging markets for us in terms of LC and emerging market business. Banks and insurers wish to support these economies, but as an industry, we need to do better at identifying mitigating factors, especially in politically unstable environments. Underwriting becomes harder with uncertainties like protests and changes of power.

One area for improvement is aligning how rating agencies assess Africa. We rely heavily on Moody’s and S&P, but often their ratings don’t align, which complicates our decisions because we take the lower of the two whereas a client might take the higher one. Better alignment and information sharing could help us get more comfortable in these markets.

Another example is corporate risk, particularly in covering payables deals. We’ve seen multilaterals becoming more involved here, which we support. By backing non-traditional buyers, especially with ECA and/or development finance institution support, we can open up financing to a wider range of suppliers, including those in deeper tiers that such institutions focus on.

Gonzalez: I completely agree with Marilyn, especially on reaching the deeper tier. Another key issue we need to address is capacity constraints. In some areas of trade finance, market appetite is quite limited – both country- and product-specific and, on the insurer side, only a handful of players are active. We need to increase or introduce fresh capacity, perhaps by bringing in non-traditional trade finance players. We’ve had success leveraging capacity from such players when led by a major insurer. Solving the capacity challenge is crucial.

Hall: There’s perhaps a disconnect between what banks and insurers do. Having been on all sides in my career, it’s clear that banks often go deeper than most insurers are willing to follow. Banks have broader relationships beyond trade finance, covering areas like euro or dollar clearing and FX. As brokers, it’s on us to help bridge this gap and facilitate stronger connections between banks and insurers.

Spiers: Take BBVA, for example, with a strong presence in LatAm, like Santander. Our banking clients range from large corporates to SMEs, but when we approach the insurance market, their appetite doesn’t always extend down the credit curve where we need it. While multilaterals provide support, it’s unclear if they’re adding capacity or if insurers are just shifting their limited capacity from banks to multilaterals, which doesn’t solve the issue of mobilising additional private capital.

Herrero: I understand the point about multilaterals, but without them, some insurers wouldn’t touch certain countries at all. They add real value, and we recognise that. Banks are also realising that insurance capacity is expanding in certain markets because of multilateral involvement.

Blattner-Hoyle: I agree with Santiago that ECAs play a key role in helping us get comfortable with certain risks. Chris, this is where brokers like you can add real value – by providing a clearer picture of the mitigating factors in terms of their wider relationships, such as the clearing, and account structures. Understanding what would happen in a downside scenario, especially during geopolitical events, helps us assess risk better and maintain pricing adequacy that meets both our needs and the banks’ requirements for their clients.

Hall: I think we’re doing some of that, but as an industry, there’s still more to be done.

Now, as we look ahead to next year, let’s first reflect on deal flow this year. Sitting here in Spain, what has deal flow been like in Europe, particularly in Iberia, compared to other regions? What’s been keeping you busy? Have you noticed any shifts or new trends?

Carrion: I primarily see the credit insurance side of the business, and it reflects the broader Spanish market. Traditionally, Spain has been centred on supply chain finance, factoring, confirming and surety, which is where we have our largest portfolios of assets. We also support export finance in emerging markets, following our clients’ needs. While there are few insurers and brokers here, it’s a growing market, as Marilyn mentioned, and we’re happy to see that momentum.

Gonzalez: I see a similar trend in Spain, with a focus on trade finance – receivables and supply chain finance – and a shift towards more structured deals rather than plain vanilla. There’s also been an increase in syndication, driven by larger transactions and capacity constraints. Whereas before, it was often a take-it-or-leave-it approach, now there’s more openness to syndicate policies.

This has led to more discussions around wordings, especially in an uncertain regulatory environment, as we align insurers and banks involved in syndicated deals. Each bank has its own legal and compliance requirements, which makes wording reviews critical.

On a European level, there’s been significant activity in the renewable space, both in project finance and even some supply chain finance. We’ve also been structuring portfolios to bring non-payment capacity into trade finance deals, which has been another challenge.

Spiers: ESG often focuses heavily on the environmental side – renewables, sustainable supply chain finance, project finance or exporting renewable goods. It’s all driving change, and banks are pushing more into sustainable finance. At BBVA, the CEO of the Corporate and Investment Bank is also the head of sustainability, showing how core this is to our business model and growth. While the environmental focus is strong, I’m not sure, as an industry, that we’re paying enough attention to the ‘S’ yet, but we’re definitely embracing the ‘E’.

Herrero: In Spain, we see a lot of renewables – wind, solar – and interesting structures in the renewable supply chain, really supportive. But at the European level, we’ve also seen telecom towers, fibre, data centres and, of course, the usual project finance with infrastructure and asset-backed finance. There is a lot of activity.

Blattner-Hoyle: In both Madrid and globally, portfolios are one focus right now. Significant risk transfers (SRTs) are a big topic, both in receivables and across various assets. We’ve also seen more balance sheet management requests, especially towards year-end, which is a positive sign from several banks.

Basel is creating opportunities despite the tough news on the 45% loss given default (LGD) from the UK and Europe. One key area is unrated subsidiaries of rated corporates, where banks can benefit from sharing the risks with insurers due to new Basel regulations.

Additionally, there’s optimism in the US with Basel’s insurance recognition. US banks seem to be gearing up for 2025, especially if credit insurance gets validated by the regulator.

These are just a couple of interesting topics, and there are more opportunities in project finance and portfolios thanks to Basel. Despite the challenges, there’s potential for strong partnerships between banks and insurers moving forward.

Herrero: I think the Basel regulation changes might disrupt the playing field a bit. Some banks that were benefiting before won’t anymore, while others that weren’t will now see advantages. Banks using the standard model won’t face the same constraints, which could make things more efficient and improve terms for them. It’s definitely an interesting time, and I agree with Marilyn that these changes will create new opportunities for us.

Gonzalez: I completely agree. From what we’re seeing, it’s starting to level the playing field. Banks that had an internal advantage are now facing more balanced competition. Some banks will continue business as usual, but they might be more competitive in certain transactions. Others, especially those that took more of a price-risk approach, could benefit from the changes. In the US, I agree with Marilyn; everyone’s preparing, and if the outcome is positive, it could be a game changer, especially if US banks start adopting Basel-compliant policy wordings.

Spiers: The only thing I’d add is that even if the most optimistic LGD outcome isn’t achieved, it’s still been a positive step to ratify and validate the product. Regulators have taken a deep look at how banks are using it – the volumes, the terms – and they haven’t said it can’t be used. That alone is encouraging and should give banks confidence that this is something regulators are aware of and accept. So, in that sense, it’s still a positive development.

Blattner-Hoyle: There are still doors open, and we should be clear about that. The key issue is the lack of data to validate a lower LGD. But that’s because we have such a strong product – insolvencies and loss ratios for both banks and insurers are very positive, and insurers rarely go bust. So, in reality, it’s a compelling story, and regulators seem to have validated that.

Hall: Let’s pivot slightly: banks and financial institutions, in general, often buy the product for capital relief or limit purposes, but also because, if something goes wrong, the product responds. We all know the payout ratios are among the best.

What do we think will happen in the claims world? We have talked about the post-Covid claims bounce, which hasn’t really materialised yet, though claims seem to be ticking along. A few sovereigns have wobbled, and in some cases, wobbled significantly. What do we think the next 12 months will look like?

Herrero: I think claims are up. We’re paying out in places like Argentina, Ghana, Zambia, Ukraine and Niger. There’s a lot of activity, and we’re closely watching sovereign debt renegotiations and rescheduling in Sub-Saharan Africa. But that’s not stopping us from maintaining capacity – we’re just being selective. For example, we can’t offer capacity in Ghana right now because we’re paying claims there. However, we’re still looking for the best opportunities in other countries. This trend of rising claims is clear, and we see it both from the Berne Union and in the private market.

Hall: Exactly, you’re paying claims where appropriate but still doing business, which is a good balance.

Now, let’s talk about technology. We’ve touched on portfolios, which is its own form of tech, but efficiency is key to making our lives easier, whether you’re a buyer, intermediary or provider. So, what products or tools are you seeing, needing or would like to see developed? Maybe we can start with the buyers.

Carrion: We’re trying to benefit from new technologies, and the bank is investing in that. Specifically on the credit insurance side, one thing that’s clear to me is that we, as an industry, need to improve our processes. Right now they need to be optimised, especially during the binding process. The due diligence is complicated and slow. I’m not sure if technology can completely solve this, but maybe we need to standardise things a bit – both in terms of wording and what information insurers need to review deals. Once that’s standardised, we can start thinking about digitisation.

There are already some digitised products, like LC business, that work well, so we could explore digitising other underlying assets too. But one challenge is that different market players are doing different things – brokers and banks often use their own platforms. It would be ideal to have something that’s market-wide, a tool everyone – brokers, banks, insurers – could use.

Spiers: We need interconnectivity. You can use your platform, I can use mine, but they need to be able to communicate with each other. That’s what’s missing right now. Everyone’s developing their own tools in isolation, and while a central marketplace might not be realistic – though maybe it is – the key is just getting these platforms to talk to each other. That’s the real challenge.

Herrero: We’re facing the same issues – lots of different platforms in the market. But let’s remember, we’ve come a long way. We’ve gone from binding policies with paper to just clicking a button, so that’s a big leap. In terms of AI, it’s definitely useful for managing information. For example, with big obligor portfolio management, it could help with reviews and updates. But when it comes to underwriting complex risks and transactions, it doesn’t seem like AI will play a big role in that anytime soon.

Gonzalez: Absolutely, using technology for management on project finance deals – especially with heavy documentation-sharing – can really work in your favour. Not for underwriting, I agree, especially for larger deals, which still need to be underwritten as they always have. But from a management perspective, particularly with documentation, it can make a huge difference.

Especially in long-term deals like project finance where the tenor can be 20-plus years; no one knows if the same team will be around in five, six or seven years. So having a secure vault for information – where you can access the underwriting process, past questions, or shared documents – adds real value. But it’s key that this system is open and can integrate with everyone’s platforms.

Blattner-Hoyle: Making platforms broker-agnostic is essential, especially since both insurers and banks work with multiple brokers. It’s a fundamental issue we need to solve to make things easier for our banking partners. We’re working on an interface to connect with different platforms more easily. Since there are so many platforms out there, we’re developing a solution that can map data fields accurately across systems, allowing us to link up with our clients’ and brokers’ platforms quickly and efficiently.

On underwriting and delivering customer value through technology, we recently had a blue-sky thinking session with a major tech provider, and something that resonated was the idea of AI supporting credit analysis and underwriting. They pointed out that when AI does the initial analysis, and underwriters then review it, the results tend to be closer to perfection compared to when humans work alone or the AI is used to check the underwriters work.

By 2026, we’re hoping to integrate AI into more of our business assessments. We may start with documentary trade, where banks are already using AI, and expand from there. For example, AI could help spreading financials or just filling in key data into systems, and underwriters could check the AI’s work, rather than relying solely on manual data entry. There’s a lot of potential there.

Hall: Marketplaces are a key part of the conversation. Lloyd’s has mandated one, which makes sense given its role, but now we’re also seeing many go in the white-label direction. I won’t comment on which approach is better, but it’s definitely adding more noise and complexity. Until we standardise, we’ll all continue to struggle with this fragmentation.

Alternatively, it might take a big company buying up all the tech platforms and consolidating them.

Blattner-Hoyle: My hope was that an independent finance or tech player would step in as the intermediary, levelling the playing field for everyone. I am curious to see if that will happen.

Hall: As we close out our discussion, do you have any final thoughts on the future of the business?

Tran: The market has evolved tremendously in the past five years, both in terms of transaction types and geographically. It reflects the broader changes in global society, and what amazes me is how well our industry has adapted to that. I still hear concerns about multilateral development banks cannibalising capacity that used to belong to banks, but I honestly believe the overall capacity is just continuing to grow. The numbers show it – capacity for single transactions now runs into the billions, regardless of the tenor.

The market remains incredibly dynamic and vibrant, and I’m excited to see it grow. We’re seeing new customers, including banks and financial institutions that weren’t familiar with the product, coming on board.

The future prospects look very positive.

Hall: That’s a great note to end on. WTW’s annual market capacity survey shows about US$4bn in contract frustration risk if everyone puts their max line sizes down. It’s substantial support for the right types of transactions, which is really encouraging.

With our time almost up, it’s fitting to get into the holiday spirit. So, what’s on your Christmas wish list for next year? If you’re an insurer, what would you wish for from your clients and brokers? And if you’re a banker, what do you hope for from your brokers and insurers?

Blattner-Hoyle: On my wish list, it’s really Basel success in recognising the importance and stability of credit insurance in the trade ecosystem – whether in one or all of our industry suggestions. That would be the best gift for next year.

Spiers: More capacity in emerging markets is definitely on my wish list. Going back to the trade finance gap, especially in LatAm, I understand there are some tricky jurisdictions, but we just don’t find enough of what we need there. We’d love to finance more, but we need partners willing to join us in those regions.

Gonzalez: If I had to summarise my wish list in two things, it would be more transparency and flexibility from both sides. If we can bridge the information gap between what clients want, how they assess risk, and how we, as brokers, translate that to the insurance market, it would make a big difference. On the insurer side, if they’re flexible and willing to understand how the bank underwrites the risk, we could unlock more appetite, capacity and solutions.

Herrero: I’d wish to deepen our relationships with clients – building even more trust and collaboration.

Not that there isn’t trust now, but strengthening it further would allow for better information sharing. With a deeper understanding of risk, we’d be in a much better position to help clients more effectively and more broadly.

Tran: I’m ambitious too, so I’d add all of that to my wish list as well! For me, this year will be about adaptation, especially with the Basel effect. What I’d really like is for us to work together more closely and be more innovative in finding better solutions – whether for different asset types, banks or specific needs. In some cases, it might be SRT solutions, portfolio solutions or funded options for investors or insurance companies. Maybe it’s about working with the investment arm of insurers or adapting underwriting criteria to include new borrowers. Long-term innovation is what will keep the business moving forward. And I’m certain we’ll continue needing strong partnerships with brokers and insurers to make it happen.

Hall: As moderator, I’ll take the privilege to add one of my own wishes, which ties into everyone else’s: general growth. I’d love to see more clients entering the market, a deeper share of wallet with existing clients, and a broader penetration of the product across different client bases. And perhaps even a few new insurers joining in – we’ve already seen new MGAs coming into the space, and there might be other niche players entering the market in the next year or two. That would be great for the industry’s continued expansion.

The statements and opinions made by the contributors of the roundtable discussion are those of the relevant individuals and do not necessarily represent the views of WTW. WTW is not responsible for the accuracy or completeness of the third-party views contained in this article.

WTW offers insurance-related services through its appropriately licensed and authorised companies in each country in which WTW operates. For further authorisation and regulatory details about our WTW legal entities, operating in your country, please refer to our WTW website at https://www.wtwco.com/en-gb/notices/global-regulatory-disclosures. It is a regulatory requirement for us to consider our local licensing requirements.