Cover Stories

Global opportunities for trade credit insurance

As we enter 2019, there is a lot to worry about. Political and economic instability appear almost everywhere, from the UK high street, through to US-China trade, an assertive Russia, and our very own Brexit. You could be forgiven for thinking that the world is yet again heading for a titanic fall of 2008 proportions. It may be or may not, not even the well-studied economists and political pundits can agree.

 All of which provides a very uncertain background for not just business but for credit insurers as well; but, then again, hasn’t it always been the case. Asked almost continually over the years and most insurers would state that there is a lot to worry about. The very global nature of the credit insurance product, in that it touches all parts of the world and every industry, means that there is a lot to consider, review, and understand. It is partly in the DNA of insurers and individual underwriters to almost always be concerned.

Given such a scope of engagement it is not surprising that the odds of something happening somewhere, or at least being a cause for concern, remain very high. You don’t need to be a harbinger of doom, to see that it is uncertainty that creates a selling point for our product and that second pair of eyes to help in an ever changing world is prudent.

Opportunities to grow trade credit and political risk business, both in regions and scope of product, remain strong. The ever more bespoke nature of each insured’s policy, be it in structure or policy wording , provides an opportunity for credit insurers to engage with a broader range of customers.

Many institutions or corporates are looking for a policy or solution that not only provides the protection from non-payment, be it insolvency or through to political risk causes of loss, but to achieving capital relief and or expanded funding options. Credit insurance ceased to be only non-payment cover some time ago and the credit insurers, from the large mono- lines through to specialist Lloyd’s syndicates have been, in general, able to meet this demand. Agility in this area, the ability to adapt, innovate and meet the needs of prospective customers is the key to continued growth of the product.

The provision of tailored solutions will help to increase the penetration of the product across the world. Estimates for the use of credit insurance in the USA are as low as 3%, compared to circa 15% in Western Europe, a market considered far more advanced in terms of take up of the product. By any standards, these are not high numbers and show the potential available business, if the broader market can be reached.

If anything, penetration of the product into other regions such as Asia or the Middle East is even lower. With this much potential in the global market, the role of the specialist credit insurance broker becomes ever more important in providing the link between insurers and prospects, in hunting down new business to grow the market. Markel’s own experience in Asia and the Middle East, where we are active on the Lloyd’s platforms, has shown the benefits of bespoke products delivered by brokers keen to broaden their clients options.

With the news continuing the 2018 theme of instability into 2019 and no sign that many of the world’s political and economic problems are likely to be resolved any time soon, the offer of protection against a range of causes of loss under a credit insurance policy should have an interested audience from  banks through to corporates alike. Whilst the business pages may point the finger at credit insurers for withdrawing cover on well-known names as they falter, the support the industry continues to provide to global trade remains a real positive. .

This message of support for global and domestic trade, the protection provided and the solutions that credit insurers can deliver to unlock capital relief or further funding for a business are all points to be well made in presenting the broad scope of the product and what it can do. Part of this is to expand the knowledge of potential customers to ensure that they can see the range of solutions available from single account cover through to ground up or catastrophe solutions and a significant range in between.

It is very much up to the industry as a whole, from credit insurers to brokers to see the opportunities the current environment presents and, in the words of Robin Williams in the film Dead Poets Society, seize the day!

 

Adrian Jones

Head of Strategy Asia & ME, Trade Credit, Markel International