1. Credit Insurance - Global companies
Presentation by:
Philip Prunty – Executive Director
Trade Credit & Surety
V1.0
11th October 2016

2. Credit Insurance Global organisations / Trade Finance
How Global Organisations use Credit Insurance
How Credit Insurance works with Trade Finance providers
How companies manage bad debt risk
How the market has evolved in the past 5 years 
Thoughts on future evolutions

3. 4 approaches to risk Ignore Avoid - eliminate the risk
Transfer - shift impact to 3rd party
Mitigate - decrease probability of impact.

4. Why companies use credit insurance
Compete for business
Respond swiftly to opportunity
Analyse financial and market stability
On going monitoring
Domino effect (customers customer, supply chain impact etc.)
Focus internal resources while out-sourcing
Competitive advantage on size
Through higher credit limit and / or longer terms of payment

5. Access to offering and service
Underwriters and brokers structuring
Central decision -making v local
Policy underwriting – central or local
Local service ( underwriter and broker)
Efficiencies and control v company politics

6. How companies manage credit risk
Global / regional programmes
Assist in change management
Standardisation / control
Out-sourcing – order to cash functions
Align organisations functions – sales, finance, account receivables
Limitations ( skills, people, resources )
Basle III Capital Allocation requirements ( operational and market)
Trade Finance - access

7. How the company should use credit insurance
Discussion around risk tolerance levels
Risk mitigation techniques
Banks are using credit insurance for:
Capacity
Transfer risk
Transfer receivables off balance sheet into cash
Basle III credit mitigation

8. How companies manage credit risk
CRD IV – Capital Requirements Directive IV
EU legislation package for banks
Amount of capital that a bank is required to hold compared to assets
Main requirement is that under Basle III bank must hold a proportion of its capital to reflect its business risks
Capital is calculated as the value of the firms capital as a percentage of it’s risk weighted assets
Mitigating risk on loans / financial exposures is main area of focus for the banks
Under Basle II insurance could be used a qualifying mitigant if it meets criteria applicable to guarantees
Insurance has inherently conditional features

9. Capital Requirements
Some mechanisms are recognised by regulatory capital rules therefore have the effect of reducing capital requirements
Legislation is broad and not exactly prescriptive – left to each bank to decide / get own advise that protection arrangements are legally effective
Hence focus upon legal opinion
Careful drafting essential

10. Why banks use credit insurance
Requirement for due diligence on counter parties ( know your customer / know your customers customer)
Banks use investment grade insurers to minimise their regulatory capital
Increasing trend of credit insurance backed trade finance
Companies can use their credit insurance policy to obtain funding facilities from their financing banks

11. Developments in past 5 years
More insurers enter market
More capacity
Increasing trend of credit insurance backed trade finance
Non cancellable buyer credit limits / delayed effect
Syndication more common
Layering / more imaginative structuring
Underwriter information – country/ sector / economic analysis
Modelling / scoring portfolios

12. Regulatory environment
Regular remarketing / tendering
Prices driven downwards
Cost ratios pressure
Exposure accumulation (capacity at pre crisis levels …and yet prices ..)
Conditionality removal
IT / ledger integration

13. Where to from here… Passporting issues
IT / ledger / finance developments
Integration of credit insurance and bank offerings / white labelling
European banking industry – non performing loans , structural reform requirement and no softening of prescription of capital requirements.

14. Thank you Presentation by: Philip Prunty Contact details
Tel: