Small decline in credit and political risk capacity, report finds

Capacity in the credit and political risk insurance (CPRI) market is down slightly in 2019 but non-trade credit capacity has seen an increase, according to BPL Global’s Market Insight 2019 report. BPL Global said there have been some casualties in terms of insurance providers, but even with the decision of a few insurers to discontinue writing CPRI in 2018, there have been some new joiners and capacity and product offerings continue to grow. “Our 2019 market capacity survey indicates that while there has been a slight decline in overall credit capacity, there is an encouraging increase of around 15% in non-trade credit capacity and increases to both non-payment public obligor and political risk lines,” said the specialist broker. The report reveals that the headline maximum per risk capacity has dropped slightly in some lines, but for non-payment private obligor risk, market capacity at tenors of seven years or more is on a par with last year. “This demonstrates the CPRI market’s continued appetite for covering long-term risks in this business line, where the availability of capacity for short-tenor risks is rarely an issue. As for non-trade business (formerly coded as ‘financial guarantee’ until Lloyd’s regulations changed last year), we have seen an increase in maximum per risk capacity,” the report states. The report looks at the potential impact of Brexit on existing long-term policies, which it says has been a major concern for the CPRI market. “A prominent feature of the CPRI market, such policies extend beyond Brexit day and were underwritten by UK insurers relying upon their EU passporting rights,” it states. “Does the loss of UK insurers’ passporting rights mean that these policies become unenforceable after Brexit? We have obtained legal opinions in a number of key European jurisdictions confirming that, whatever the outcome of Brexit, the validity and enforceability of all insurance contracts will not be affected by an insurer’s loss of licence or authorisation.” On the issue of whether UK insurers can continue to service and pay claims under such insurance contracts post-Brexit, BPL Global says the picture is mixed, depending on the jurisdiction of the insured. “However, the transferral of business by CPRI insurers to new European entities of equivalent financial strength is removing any potential ambiguity on their ability to service existing, long-term contracts and pay claims,” the report states. “In addition, France, Germany and the Netherlands have all committed to introducing emergency legislation, allowing them to remove any legal or regulatory risk facing UK insurers suddenly deemed unlicensed carriers in the event of a ‘no-deal’ Brexit.” As for claims, the report notes that financial institution clients have received the bulk of BPL Global’s claim collections since the financial crisis of 2008, with the African continent remaining the most challenging environment both economically and politically, resulting in both claims and restructurings. According to the report, BPL Global’s historical data highlights the regional diversity of where claims have been collected, with the top five countries by claims value – Ukraine, Brazil, Russia, Indonesia and Venezuela – spanning three separate continents.

Small decline in credit and political risk capacity, report finds

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