Monday, 20 February 2012
Demand for global credit cover rises as buyers seek to control aggregates
The financial crisis has seen a shift in favour of global credit insurance programmes, as companies seek to get a better grip on their global credit exposures.
There has been an uptick in demand for credit insurance and global programmes from sectors that had not previously shown interest, said Jason Curtis, Head of Global at Atradius in the UK. There is also more interest from companies that previously allowed local subsidiaries to arrange their own cover.
“More and more corporates want global protection and to understand their aggregate risks,” he said. “Global programmes have seen rates come down and appetite increase. It has become a buyer’s market for credit insurance in the past 18 months,” said Curtis.
There has been huge demand for multinational credit insurance programmes over the past three years, said Stuart Lawson at Aon. They are a great way to embed consistent credit risk management and achieve economies of scale, he said.
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“The 2008 financial crisis has accelerated the trend toward multinational credit insurance programmes,” said Mr Lawson. “Credit risk and financial risk has become a boardroom issue and has been pushed up the pecking order by the crisis. Global programmes are a good way to identify and quantify credit risk.”
The move to global programmes reflects the increasing involvement of risk managers in managing credit risk, said Mr Lawson. “Certain risk managers see credit insurance as part of their remit. We deal more and more with risk managers although typically in partnership with the finance team rather than stand-alone.
“Companies have been reviewing credit practices, and at a time of limited resources, are looking at viable ways to embed credit risk management without increasing their head count. With their IT platforms global programmes are an effective way to achieve this.”
Companies are also making more use of captives for their credit coverage. Prior to 2008 Aon Trade Credit UK managed just two credit insurance captives, it now has eight.
“We have not seen a flood, but there is a steady flow of companies looking to use their captives to put credit risk management discipline in place and purchase insurance cover,” said Aon.
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