Insurers target Asia for trade credit insurance

Such is the level of capacity and competition in the market, that pricing has remained static despite a growing number of insolvencies and a growing loss ratio for insurers. Consequently insurers and brokers are both pushing hard to encourage a greater take-up of trade credit insurance among Asian corporates. One of those insurers is Markel that recently celebrated the fifth anniversary of its Singapore-based trade credit insurance team. According to Ewa Rose, managing director, Trade Credit and Political Risk at Markel, the market in Asia has changed considerably in that five years, growing from five markets to 22, reflecting a global trend. "The capacity in London has trebled since the pre-crisis era of 2007 with insurers adding capacity or adding tenor to existing capacity and with new entrants joining the market."hideDemand is also increasing due to the growing concern over insolvencies and a challenging risk environment, in Asia especially where the fall in the Chinese commodities and stock markets have had economic implications for the entire region. The banks have also played a part in the growing demand, says Ms Rose. Many are insisting on the use of trade credit insurance as a means of collateral for any corporate lending activity, due to regulations such as Basel II and a desire to expand their capacity to take on more counterparty risk. In response to the growing demand and competition, insurers are looking to develop a wider portfolio of products beyond cover for bilateral trade arrangements. One such example is the provision of cover for defaults, or non-trade opportunities, rather than for specific trades. "At Markel we are able to write this coverage on company paper but we want to be able to offer it through the Lloyd's platform," says Ms Rose. This is not currently possible at present because these non-trade deals have a specific risk code within Lloyd's that not all syndicates have the authorisation to write, but Markel is confident that Lloyd's will give these type of policies a green light before long. Markel has also added political risk to its trade credit insurance offerings and has also recruited Nicola Marriage as a senior underwriter of political risk. And while China is the most influential of Asian markets in terms of both political and economic factors, Ms Rose says it is important insurers are able to cover as much of the Asian market as possible, not just the more developed markets of Singapore, Malaysia and Indonesia but also the less developed markets like Laos, Myanmar, Cambodia and the Philippines. "The loss ratios for underwriters will increase but it is really important that brokers continue to raise awareness in the market and educate the risk managers in Asia and also markets like Australia where a number of companies have been hard hit by the downturn in commodities markets," says Ms Rose. "For the first time we are seeing no hardening of prices despite the increase in loss ratios for underwriters and that is down to the increased capacity. Due to quantitative easing there is a lot of capital out there looking for the best rate of return and some of it is coming to the trade credit market. For example, there are more reinsurers now writing direct business. "If there is a correction in the market, I don't think it will be immediate. The biggest challenge for insurers is to drive that demand and continue to be flexible."

Insurers target Asia for trade credit insurance

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Related Articles