“I had an enquiry from
someone who has been trading for years. He never used to make trade credit insurance enquiry. This could possibly be due to the need to gain access to financing.
”
Tony Redwood, Founder, Redwood Trade Credit Insurance
on assessing credit risks as well as improving the quality of their balance sheets. Trade credit insurance underwriters have also found new appetite for risks since the global financial crisis swept the globe in 2007 forcing many underwriters to shrink their risk portfolios. Tony Redwood, founder of Redwood Credit Insurance Ltd, notes that premiums for trade credit insurance are currently more realistic. “Underwriters are certainly more responsive to deals put before them.” Some underwriters who were completely off providing cover for business deals in Fiji are slowly starting to look at deals being presented, Redwood says. He cautions that underwriters are still imposing tough conditions before taking on business in the Pacific and would only consider deals where the buyer has a reasonable trading history or is a blue chip company.
“Cover is available on
a case-by-case basis. It depends on which country or countries you are dealing with, what are the risks, who your buyers are. we need to understand what is being sold, the payment terms and the quality of your buyers.
”
Michael Kayes, Trade Credit Manager at QBE
24 EXPORTER
GROWTH During the peak of the global financial crisis, trade credit insurance premiums skyrocketed by as much as 60% as trade credit insurance companies aggressively trimmed their business portfolios. Some completely withdrew from providing cover for selected sectors such as wool and construction while others avoided taking on business with companies they have no history with. QBE’s New Zealand manager for Trade Credit, Michael Kayes says: “The market is certainly showing signs of renewed interest in trade credit insurance, driven mainly by the banks.” He has been seeing a definite growth in business enquiries from new clients who have never had trade credit insurance before. They come from a good cross section of industries.
During the peak of the global financial crisis, trade credit insurance premiums skyrocketed by between 20 and 60% as trade credit insurance companies aggressively trimmed their business portfolios. Redwood is also seeing a similar trend. “I had an enquiry from someone who has been trading for years. He never used to make trade credit insurance enquiry. This could possibly be due to the need to gain access to financing.” Barry Squires, head of international business at Westpac says banks provide trade finance based on the merit of each deal. “Occassionally we will make it a requirement – mostly when they are dealing with risky parts of the world.” He adds that banks encourage their customers to understand their risk and would, where warranted, ask them to look towards additional risk protection through trade credit insurance. “Our exporters are dealing with an extended supply chain exposure – not only their customers but their customers’ customers. Their markets are faced with way more difficult conditions than ours,” Squires says. While risk appetite has returned, insurers are still hawkish. “Cover is
Barry Squires, Head of International Business, Westpac
available on a case-by-case basis. It depends on which country or countries you are dealing with, what are the risks, who your buyers are. We need to understand what is being sold, the payment terms and the quality of your buyers,” Kaye says. NZeCO Increasingly, the New Zealand Export Credit Office (NZECO), trade credit insurance companies and banks are conducting joint marketing to raise awareness on the availability of government support for export credit facilities. The NZECO’s manager Carmen Moana says her office has been getting more referrals from banks, some from the New Zealand Trade and Enterprise and also from the Ministry of Foreign Affairs and Trade. The NZECO early this year received a renewed commitment from the government to extend its current operation until June 2014. This will enable the NZECO to offer a range of export credit cover to meet areas where private sector trade credit insurers are not able undertake the business. Moana says her office has been working closely with other private sector suppliers to be more pro-active in marketing the NZECO’s facilities. The NZECO has been doing a lot more road shows to promote its services. Since February 2009, the NZECO has issued 85 policies for deals under the $200,000 region. This makes up 47% of all policies issued and is primarily for short-term trade credit guarantee. “But we have also issued four policies covering payment terms longer than one year, and seven bond guarantees with exposures of less than $200,000,” Moana says. In one case example, the NZECO helped a pet food company K9 Natural