Posted on 23 Apr 2010
Credit insurers lived up to their obligations during the financial crisis by insuring trade
credit risks (+/- 20 million credit limits) and paying out claims at a ratio of around 84%
in 2009 (pre-crisis +/- 40%). That was stated at today's press call on "Trade Credit
Insurance's role in a fragile recovery from the financial-economic crisis" with ICISA’s
President Clemens von Weichs and its Executive Director Robert Nijhout.
Both also emphasized that trade credit insurers demonstrated their ability to respond to the
difficult economic situation. The cost of capital and a tightened risk environment in the crisis
still challenges the industry, leading to higher premium rates and stricter conditions – a
development that the experts expect to continue. Therefore, higher transparency about credit
limit decisions and enhanced services in risk management consultancy for clients will be a
strong focus in the future.
Increase in demand for Trade Credit Insurance
The financial-economic crisis has led to a significant increase in demand for Trade Credit
Insurance cover. Banks and other trade financiers had to take measures during this crisis
which resulted in increased pressure on supplier’s credit terms and led to high risk scenarios.
Available capacity was not affected by the crisis, although pre-crisis terms are no longer
Von Weichs highlighted how trade credit insurers continued to support their customers during
the crisis. “The industry’s involvement is illustrated by some 20 million running credit limits.
Insured exposures are at EUR 1.8 trillion. These dropped by some 10% in 2009, in line with
lower trade volumes. Claims shot up in 2008 and 2009, which resulted in a claims ratio before
costs for the sector of around 84% for 2009, compared to pre-crisis loss ratio levels of around
40% - 60%”, Von Weichs confirmed.
Nijhout added: “With a high but stabilized claims ratio Trade Credit Insurance confirmed the
industry’s ability to manage risk and their role in a difficult financial environment. The quality
of credit limit management is appreciated by customers. They show today an even increased
interest with regard to this consultancy and the management of credit risk through a credit
Trade Credit Insurers increase information sharing
High policy renewal rates of around 80 to 90% confirm customer satisfaction with their
insurance partners. Trade Credit Insurers will in the future emphasise even more the added
value of their risk management role for clients and will make the respective processes more
“The market is now in a stable but still challenging situation.” said Von Weichs. Nijhout added:
“Increased involvement by governments in short-term Trade Credit Insurance did raise the
visibility of the sector. The government support schemes serve efficiently the needs of the
customers, but they had limited demand. It is expected that these support schemes can be
terminated by the end of this year.” emphasised Nijhout.
Continued availability of Trade Credit Insurance cover gives confidence and security during a
fragile economic recovery.
The economic recovery can be considered as faster than expected. Worldwide GDP
(following major economic forecasts) could rise in the range of 3-4%, mainly driven by
“Trade Credit Insurance exists since the beginning of the last century. Credit insurers went
through economical downturns or financial crises together with their customers. The industry
will continue to give this support to their customers.” said Nijhout.
Trade credit insurers will meet as well capital requirements which could be re-defined by
Solvency II. Another uncertainty for trade credit insurance customers with regard to the
economic environment could be a possible rise of interest rates. This could increase cost of
financing for producing and trading companies.
The International Credit Insurance & Surety Association (ICISA) brings together the world's leading
companies that provide trade credit insurance and/or surety bonds. Founded in 1928 as the first credit insurance association, ICISA has currently 45 members in total. The trade credit insurance members account for over 95% of the world's trade credit insurance business. Today, with over USD 2 trillion in trade receivables insured and billions of dollars worth of construction, services and infrastructure guaranteed, ICISA members play a central role in facilitating trade and economic development on all five continents and practically every country in the world.