Credit insurers prepare for rising pandemic-related claims

During a virtual 'stocktake' by Berne Union members of the state of the export credit and investment insurance industry during the COVID-19 pandemic, many members reported a marked increase in payment deferrals and pre-claim situations. Most of them also expect to see COVID-related claims levels rising from early next year.

This development comes at a time when claims activity is relatively subdued with $3.3bn being paid in 1H2020 compared to $3.2bn in the same period last year.

Members also noted that increasing corporate insolvencies and the wide economic recession are the biggest ongoing concerns. They flagged particular vulnerabilities in the transportation sector especially aeronautics and shipping as well as retail, construction and product manufacturing. The Berne Union, also known as The International Union of Credit & Investment Insurers, is an international non-profit association and community for the global export credit and investment insurance industry.

In a survey conducted by the association, 80% of members reported an increase in new demand –most commonly for short-term credit and working capital products. Around a third of respondents indicated that this includes a substantial increase in inquiries from new clients.

In terms of risk appetite, the majority of respondents (78%) indicated that they are either increasing (43%) or at least maintaining (35%) overall capacity while most members are simultaneously decreasing limits for individual countries, sectors and counterparties.

Berne Union secretary general Vinco David said, “A combination of the natural claims cycle, and mitigating efforts from governments around the world means that COVID-related claims will not appear immediately. We do expect to see increasing claims in 2021, but exactly how much is still not clear. Many of the special government measures are set to expire by the end of this year.

“This may be a determining factor, as indeed will be the substantive course of the pandemic itself, which remains to be seen. The credit insurance industry continues to maintain capacity but is exercising prudent risk underwriting.”

Source: Asia Insurance Review