New credit insurer aims to address buyers’ concerns

With the market showing signs of recovery, and the new platform itself a sign of increased competition within the market, Equinox Global hopes to offer two specific products to address buyers’ concerns, Mike Holley, Chief Executive of Equinox Global, told Commercial Risk Europe. “As the company looks to combine the benefits of a mono-line underwriting facility with the stability of multiline capital,” he added. The trade credit industry has come under heavy criticism over the last two years due greatly to the lack of certainty of cover for buyers. Unlike most other types of insurance credit insurance policies give insurance companies the right to vary terms midway through a policy year. In recent times, as the credit storm took hold in 2008/9, insurers have increasingly acted upon this and withdrawn credit limits midway through policy years if they deem a trade partner of the insured to be too risky.hide“Whilst that can be a good feature of the product, as it can help to warn the insured that this is no longer somebody to trade with, the perception has been that that device has been used liberally and that too many credits have been withdrawn too quickly, which has undermined the certainty of cover,” explained Mr Holley. In order to address this concern Equinox Global will offer two distinct products. One will simply offer credit limits that cannot be cancelled for the duration of the policy period. However, many customers may be uncomfortable with the extra responsibility placed upon them by such a policy, noted Mr Holley, as it means that the insured has to monitor its own customer portfolio and prove they have done so to their insurer. For those customers who like the idea of a credit limit service, but not the idea that credit limits can be taken away at the whim of the insurer, Global Equinox has a 'hybrid' product. It provides a credit limit service that can only be reviewed or cancelled subject to certain risk triggers and after consultation with a third party, explained Mr Holley. “The idea is we agree with the insured at the beginning of the year a list of triggers that would have to happen to one of its buyers before we would have the right to review the credit limit. And the figures with our policies are always set up with third party credit scoring parties, so it would not be our judgement that the risk was deteriorating, it would be an independent referee’s,” he said. The issues surrounding credit withdrawals and certainty of cover within the market are directly linked to the instability of the mono-line insurance companies that tend to service the market, explained Mr Holley. “The perception is that mono-line capital does not have the benefits of diversification associated with multi-line insurers and may struggle a little more to ride out the economic cycle,” said Mr Holley. “This instability forces insurance companies to make decisions on coverage that it otherwise may not want to do,” he added. Equinox Global is a Managing General Agent [MGA] backed by four multi-line insurance companies. “This enables us to bring multi-line capital to the credit insurance market,” noted Mr Holley. Equinox Global's current carrier panel is Lloyd’s (54.25%); Aspen Insurance UK Limited (30%) and Liberty Mutual Insurance Europe Limited (15.75%).The Lloyd’s portion is shared between Beazley (31%) and Pembroke (23.25%). Whilst other multi-line providers exist, what differentiates Equinox Global is the fact that it brings the benefits of a mono-line underwriting platform, via its MGA structure, along with those of multi-line capital, added Mr Holley. It will distribute exclusively through its trade credit broker network. The platform can write up to $75m of cover per policy and up to $20m on an individual buyer within that policy. Currently only based in London the company intends to open offices in mainland Europe soon. On the trade credit market in general Mr Holley said that it has become much more stable during 2010. He expects the market to be 'slightly' soft for buyers at renewals and for insurers to record good loss ratios for 2010. The market is becoming more competitive with underwriters regaining their appetite, he added. Steen Parsholt has been appointed non-executive Chairman of Equinox Global. Mr Parsholt was a member of the managing board of mono-line credit insurer Atradius and its forerunners from 1999-2002, where he was responsible for client relationships, policy underwriting and group risk management. He was subsequently Chairman and CEO of Aon Nordic Region during 2004-5. Mike Holley, who has 27 years in the trade credit insurance market, was most recently Director of Special Products at Atradius. Glenn Sexton has been appointed as Senior Underwriter. He has 40 years’ experience in the trade credit industry, the last 23 years of which have been with AIG, now Chartis. Also on the underwriting team will be Alexandra Paton and Antje Seiffert-Murphy.

New credit insurer aims to address buyers’ concerns

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