The ICISA Insider - October 2020

The ICISA INSIDER

October 2020 | The ICISA INSIDER

Newsletter of the International Credit Insurance & Surety Association (ICISA) Volume 15 | October 2020

CONTENT FOREWORD UPDATE COMMITTEE CHAIRS

3 | Surety Committee 4 | Committee of Underwriters 5 | Credit Insurance Committee 6 | Single Risk Committee ARTICLES

7 | Two Years and Counting...

Interview with Patrice Luscan

9 | New Chair, New Views, New

Challenges Interview with Christian Hendriks

12 | Navigating the Risks to

Economic Recovery in 2021 Article by Rajiv Biswas

ANNOUNCEMENTS

20 | Atradius 20 | COSEC 21 | CREDENDO 22 | Zurich Insurance plc 22 | AXIS Re

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Editorial Information | For suggestions and announcements, please contact: Raluca Ezaru (editor) Raluca.Ezaru@icisa.org

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The ICISA INSIDER | October 2020

Foreword Dear Reader, As we exit summer and head into autumn and winter, the prospect of a second wave of the pandemic looms on the horizon – and in many cases, has already begun. ICISA members have worked hard throughout the year helping an already heavily impacted global economy to keep moving. While lessons have been learned throughout the year, major challenges lie ahead within and outside the sector. The only way out of this seems to be continued vigilance, discipline and thoughtfulness, as well as biding our time until circumstances improve – sound principles for any time, but certainly during a crisis such as this one.

But while 2020 finally begins winding down, at ICISA our new session is just beginning. And just as we must hope for a future with the pandemic behind us, we too are beginning to look ahead with excitement to the coming year. In this edition of The Insider we hear from our committees following their recent Autumn meetings – held virtually of course – where they discussed the ongoing situation as well as priorities for the future.

Similarly, returning ICISA President, Patrice Luscan is interviewed about his goals for the year ahead, including his aim for ICISA to be a driving force for innovation in the sector. Elsewhere, you can read the usual wide range of analysis and commentary from experts in the sector.

As ever, as a sector that is centred on people, we are pleased to share the latest news on appointments from members and others in the industry.

Stay safe!

ICISA Secretariat

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Update Committee Chairs Surety Committee Marlène Hertel No doubt, COVID 19 and its impact will take a prominent place in the discussions of the Surety Committee over the next few months, if not years. This was seen already during the Autumn Meeting of the Committee, which took place in September.

The immediate effect resulting from the challenges of controlling the pandemic is the uncertainty. During the virtual Autumn Meeting, the tour de table reporting about the situation all over the world has confirmed it: uncertainty dominates our daily lives.

Economically, not all countries are suffering in the same proportion, as the severity of local lock downs and measures taken by government during them vary. The current trends shows that sectors more locally driven, like construction, were impacted differently from one country to another. However, sectors like tourism, hospitality and airlines have been already strongly affected worldwide.

That’s why in a short term more losses related to nonpayment than to a non-fulfilment of contract obligation are expected. The fact that still no significant claims related to COVID 19 affect our industry doesn’t blind any surety company. The economic impact will really be revealed after the government support measures put in place have expired.

Marlène Hertel Chair of the Surety Committee Company: AXA Switzerland

Following this objective, we want to be prepared to seize the opportunities that could be offered to the insurance companies. One of these opportunities could be to get a share of the market held by the banks in order to release blocked liquidity in favour of the economy. Brokers activities in this field have been already seen in different countries.

As in all crises, even if this one is truly unprecedented, our industry is about to face a very demanding period and to challenge people involved being called upon to give the best of their expertise.

Currently, surety companies have implemented various measures to protect their portfolios and continue to provide a valuable service to their customers. The next discussions of the Committee will focus on the development of the surety business in the current uncertain environment, keeping in mind the importance for our industry to support customers in carrying out their activity and to contribute to the recovering of the economy.

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Committee of Underwriters James Deloz Insurers and reinsurers now have more business opportunities than a year ago. The premium income of the direct credit insurers has gone up rather than down compared to 2019. And, perhaps the most noteworthy element of all, the loss ratio has not gone up a lot.

James Deloz Chair of the Committee of Underwriters Company: Credendo

The Autumn 2020 meeting of the Committee of Underwriters focused on the effects of the pandemic on Members’ business, risk appetite and results and, related to that, on the State Support Schemes which many countries have put in place.

When COVID-19 broke out globally and massively in March 2020, many actors in the sector as well as outside, saw this as the start of the worst economic crisis which the world had seen in peacetime in almost one century.

Credit insurers were bracing themselves for what they expected to be horrendous loss ratios, at a level unseen before. Some scenarios did not rule out loss ratios moving towards staggering four digit percentages.

Half a year later, the expected Doomesday scenario has not materialized (yet?). Business is resilient; the economic crisis has, in fact, been a wake-up call for some previously uninsured Sellers to consider taking out protection. Other Sellers came to realize that a low premium is not all and that stability in cover has value, which comes at a price.

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Does this mean that all is well ? No, it does not. Whilst many Credit Insurers and Reinsurers are starting to believe now that the predicted disaster may not happen, the overall sentiment is that a substantial increase of claims is still looming below the surface. On the one hand, it will depend on the severity of wave two of COVID-19.

Also, whilst government measures in many countries may for the time being still soften the economic impact of the pandemic, they are also believed to have to a certain extent a mere delaying effect, with the full impact of the crisis only becoming visible in Q1 and Q2 of 2021.

Overall, Members are cautiously optimistic compared to what they were back in March. The Spring 2021 meeting will probably come at the perfect moment to see whether the reality then matches the current sentiment now. It will certainly be the opportunity for another lively discussion and exchange of ideas.

Since the outbreak of the crisis, governments in many countries, some more swiftly than others, put in place State Support Schemes aimed not at protecting the Credit Insurers themselves, but the business they insure.

The sector welcomed these initiatives and most direct Insurers are making maximum use of these State Support Schemes. It is felt, however, that this measure to some extent overlaps with other state measures and that some of the latter may temporarily hide the underlying problems of certain companies. Going forward, direct and indirect Insurers are looking forward to continued support into 2021, but some favour a lighter support, not per se lasting throughout the entire year. Others advocate a gradual fading out of the State Support Schemes, as “going cold turkey� is seen to be too drastic for the business which the credit insurance industry serves. Here, too, time will tell and the Spring 2021 meeting comes right on time.

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Credit Insurance Committee Niels Enevoldsen As it happened to everything else, COVID-19 Pandemic influenced the work of the Credit Insurance Committee too. After the cancellation of the spring meeting, a virtual conference was arranged by ICISA. Members were happy finally to meet for a short session.

The main topic of the Autumn Meeting was the share of information on how to navigate in these difficult times.

During a tour de table members could share information about the markets and claims development in their enterprises. There was a lively sharing of information and a huge interest about the situation in each company and country. The conclusion was that members have not seen yet a significant increase in numbers of insolvencies as expected due to Covid-19. The impression is that state aid packages have been effective so far. These packages are now running out, and uncertainty remains since the health crisis is not yet over with financial impact as a result.

Credit Insurers face a long unwanted break in normal activity and the need for extension of state support schemes were discussed. Pros and cons came up, but it turns out that negotiations in many countries about extension into 2021have already taken the first initial steps. The difficult part seems to be when and how to exit these schemes and this will most likely be a topic for the committee in the upcoming months.

Besides that, the committee will closely monitor the claims development, business climate, along with trade sector challenges and share information and experience.

Niels Enevoldsen Chair of the Credit Insurance Committee Company: Tryg Garanti

Insurance Companies sharing a client” and hold cover situations can become even more relevant, especially if companies and countries decide to go in different directions.

I believe more topics will come up - even topics the committee has not thought about in the past, since the future for businesses can turn out completely different “on the other side”.

Credit Insurance seems to become even more relevant as a tool to protect a business and it will lead on to new exiting developments. I see a great future for the Credit Insurance Committee to share experience entering new areas with all that follows in relation to legal and insurance technical questions.

Being in a Global crisis and the impact it has on the daily work leaves other important topics on hold. But as soon as we return to a more normal situation the committee will again have discussions about disruption, use of new technology/data and how to work with banks including deeper insight to the Basel 4 rules. Topics like “two

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Single Risk Committee Christian Hendriks

Christian Hendriks Chair of the Single Risk Committee Company: Credendo – Single Risk

The Single Risk committee will focus on the new and the continuing issues of 2020. Unsurprisingly, the matter of great concern is the coronavirus outbreak and its potential impact on our industry and the global economy. A large number of international experts consider that this crisis will leave a lasting imprint on the world economy, causing permanent changes in regards to one-time responses brought by governments and individuals.

Even if it was not a total surprise, I think, most of us were taken aback by the extent and the quickness of the general lockdown in Europe. Quickly, the members of the SR Committee have expressed the wishes to maintain exchanges of views by video conferences on a regular basis to monitor the trajectory of the markets, with specific interests on Asia situation, potential loss experience and the demand side at first.

The very good thing is that the single risk insurance market has continued to underwrite risks, experiencing a rise in demand, partly fuelled by banks seeking to reduce their risk exposures. The simultaneous oil crisis has also driven an increased demand for coverage. Our industry, once again, has remained open for the business while adopting approach that is more cautious. Six months later after the beginning of the Covid-19 crisis, the

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members reported that even quality of risks has been improved due to the adjustments done by the insurance buyers. This said, we continue to monitor sectors and claim environment evolution, given that the outlook will be certainly less gloomy. Our market is expecting a time lag in the consequences of the outbreak and its cumulative economic costs. The first reality is that the number of fraud cases has increased, but the market does not see any direct correlation with the global pandemic. Any crisis is a revelation, in many ways, of the structural environment and the current trends in force; it may incurve trends, accelerate, or amplify them like our digital behaviour now, especially with the remote work. There is much to be done to understand long-term implications and make the adequate responses. Our committee keeps also close eyes on all governmental support schemes, although they are not concerning the single risk business but the short-term credit insurance so far. The relationship with banks will become also a matter of concern, as banks became in the last years a major provider of business.

This leads us inevitably to the regulatory environment where changes are expecting. Put on the agenda by my predecessors, the capital costs remains topic of high importance with the adaptation of Basel IV, which is underway, and the forthcoming EU regulation on minimum loss coverage for non-performing exposures.

Crisis after crisis, we have stronger arguments to put forward on the value of trade credit insurance.

Last but not least, Brexit still remains on the horizon: the transition period will end up at the end of 2020, and new rules will enter into force from January 2021.

With this uncertain time ahead involving a market that has historically played an important role in our industry developments, we have to be aware of the changes and find out how to deal, collectively, with them.

To conclude, I am tempted to say that in this uncertainty as usual environment, I am happy to pursue this thrilling experience at the ICISA with my pairs to try to give meaning to multifaceted challenges in a very friendly atmosphere.

October 2020 | The ICISA INSIDER

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Years and Counting…

Interview with Patrice Luscan

At the 78th AGM (Annual General Meeting) held in June 2020, Patrice Luscan was re-elected as a President of ICISA. Currently in his third term as a President, Patrice Luscan, Marketing & Innovation Director at Coface, agreed to share his thoughts, achievements and future goals in the upcoming months.

Looking back at the motivation for being elected again as a President, he noted that the suggestion was actually his and Kay Scholtz’s (Vice-President) in response to the uncertainty caused by the Covid-19 crisis, and to ensure a good transition in the upcoming year:

“As the crisis develops longer, we’ll all have to learn to cope with changing environments and renewed teams – albeit virtually!”

Asked about the achievements of ICISA for which he is most proud of, Patrice mentioned three main topics: the finalization of the recalibration study for Solvency 2, the advocacy efforts of the association, and the technological working groups and the projects they are working on.

First, on the finalization of the recalibration study for Solvency 2, Patrice noted that “We have been able to gather the necessary data from members and developed analyses to get across the point that a more appropriate calibration is warranted.”

Patrice Luscan President of ICISA, Marketing & Innovation Director at Coface between innovations of competitive nature and innovation of systemic nature. We have selected 3 projects of a systemic nature, and we’ve seen an impressive traction from some members this year to develop proofs of concept. Out of the 3 cases (TCI Fraud, Surety repository, Know Your Customer) it is difficult to predict how many will be implemented in the end, but the technology chapter is now open for writing.”

Asked about the future months, Patrice mentioned some of his new priorities as a President of ICISA. Here, he stressed the idea that “the Covid-19 crisis has reshuffled the priorities we had defined with the Management Committee (MC) two years ago. ICISA must be at the sides of members to manage the crisis, and that encompasses 2 essential dimensions: defending our reputation when needed and facilitating the addition of public capacity in a manner that preserves the interest of the front line insurers and their reinsurers.”

Secondly, on advocacy matters, he highlights that such efforts “will more and more require facts and figures, and I have been really proud to see it happen in a relatively short period of time.”

Additionally, his concerns are also about finding new ways of communication with and between members that address the current worldwide situation: “with sanitary measures being extended month on month in most places, we are bound to reinvent completely our traditional ways to interact.”

Thirdly, “I would also like to mention our technological working groups. Even though these projects are far from their conclusion, adding innovation to the agenda of the association is an achievement in itself, but also because it means we share a common understanding of the line that must be drawn

This is particularly hard for a community which essentially exists through meetings and who enjoys mingling with peers.

But it is vital for the association to find the new winning formats and for all participants to play the game, attend regularly and preserve the spirit of ICISA.” 7

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NEW Chair NEW Views NEW Challenges Interview with Christian Hendriks, Chair of the Single Risk Committee Christian Hendriks, Deputy General Manager at Credendo – Single Risk, was recently elected as the Chair of the Single Risk Committee of ICISA. He accepted to share some thoughts about the motivation and the plans he has as a new Chair of the Single Risk Committee. In our conversation with Christian we touch on the effects of the Covid-19 pandemic, technology and fraud developments in the industry of Credit Insurance.

What was your motivation for accepting the nomination for Chair of the Single Risk Committee?

This Chair coincides with the still developing COVID-19 crisis that has led to an unprecedented global lockdown with a direct impact on global trade. Once again, ICISA can assume a leadership role in offering an open place of exchanging and thinking on critical concerns. Thanks to our regular meetings, we all can keep a very close watch on market developments and remain vigilant with regard to any current triggers and potential evolution that may affect our industry. Therefore, considering the current environment, this nomination comes at a very challenging and exciting period. However, the biggest challenge will be to keep the level set by the previous chairs!

Are there any opportunities that you identified and you’d like to work on in the upcoming months with your Committee?

The shelves of the Single Risk committee are pretty full already with the work done by my predecessors. We need to continue to follow up on all regulatory topics, like the cost of capital under Basel IV, the impact of the EU forthcoming regulation as regards to minimum loss coverage for non-performing exposures…Added to this, new agenda items, which arose with this specific time, will ask us to address pandemic

exclusion, loss environment, trade finance landscape, etc.

They are enough opportunities, which may evolve according the market conditions.

How would you describe the effects of the current pandemic on the industry?

Everybody was expecting an economic backlash by the end of the year, after the global lockdown, once the economy will restart. The second or third waves have pushed the return to normality to an indefinite period. It is certainly too early for assessing the impact whilst everything is still in pending settlement. In July 2020, the broker AJG noted that one third of claims reported were attributable to COVID19 - crisis according to PRI insurers. The combination of oil collapse at the same time has increased claim environment deterioration.

Some sectors have been hardest hit initially, while others come out unscathed. This might help to accelerate paradigms shifts which were already in motion. More globally, the crisis raises an interesting questioning on the possible scenarios of overcorrection or under-correction of the global economic system.

First obvious effect of the current pandemic relates directly to logistic and supply chains management forcing companies to reinvent themselves.

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The ICISA INSIDER | October 2020

>>> Could you briefly indicate what you see as the most important lessons the insurance industry learned from the current pandemic?

What are some recent technology and information developments that you think might change the future of the industry?

It is too early to draw conclusions, especially since our industry has felt the impact of fraud cases more than pandemic collateral damages. We could say that the pandemic in a way has helped to reveal those fraud cases, which would not have been detected on the face of it.

If you ask Siri about “technology in credit or political risk insurance,” you will receive very little information on AI developments associated with our industry. However, there is a range of individual or collective initiatives emanating from major players, brokers and IT specialised providers to create e-placement platforms, or high tech risk management tools.

In any industry, IA and IT are from the realm of competition, so perhaps it is no wonder that this has not been widely publicized then, unless you have ensured your technological leadership.

What are your thoughts on the topic of fraud and recent “developments” on fraud emerging from the current situation caused by the pandemic? Are there new types of fraud emerging because of the pandemic?

If the pandemic brought a number of frauds to light, we cannot consider these fraud cases as “new types” or arising from abnormal situation. Those fraud cases are tailored to the same pattern and based on the gap in contractual documentation vis-à-vis the banks. We can assume that it will not be limited to the commodity sector. However, we should not conclude to a generalization of fraud cases. Cases remain rare but have potentially catastrophic consequences. Eventually this is something to address to the Committee to understand how the market will respond. |

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Is the trade credit insurance industry well prepared for the current technology and information developments?

We can’t say that the whole market is ready. The blue chips companies are taking this seriously, the smallest delegate the development to the brokers due to lack investment capacity.

However, there might come an issue of concentration risk sooner or later.

October 2020 | The ICISA INSIDER

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What more would you like to share with the readers?

All crisis is an opportunity to promote and highlight the role of our industry in the economy. The trade credit insurance sector has again demonstrated its capability to act as a catalyst for business continuity in a highly disruptive environment. Our industry is a strategic factor of economic and financial stability, and this crisis gives us the opportunity to advocate its benefits towards regulators, clients and partners. I know that ICISA is very committed to this, and the Single Risk Committee will strive to bring its support to reaching this goal.

Christian Hendriks Chair of the Single Risk Committee Credendo – Single Risk

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Navigating the Risks to Economic Recovery in 2021

By Rajiv Biswas, Asia-Pacific Chief Economist, IHS Markit

Summary The global economy is showing early signs of economic recovery in the second half of 2020, after severe lockdowns in Q2 2020 triggered deep economic contraction in the GDP of many of the world’s largest economies during the first half of 2020. The outlook for 2021 is for a year of gradual economic recovery and a return to positive economic growth for the world economy.

However new waves of Covid-19 cases in many countries in recent months are creating renewed uncertainties about the traction of economic recovery. Meanwhile governments are adopting fragmented and divergent policy approaches to tackling the pandemic. Some nations continue to impose closed borders with bans on foreigners, some have significantly reopened borders for international travel, while others have followed a more traditional epidemiological approach to managing the pandemic without severe lockdown measures.

In addition to the ongoing risks to global growth from the Covid-19 pandemic, other key risks still loom ahead in 2021, including the risk of a Hard Brexit for the UK, the policy implications of the outcome of the US elections in November 2020, and the potential further escalation of the US-China trade war.

Rajiv Biswas Asia-Pacific Chief Economist IHS Markit ||

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Will the World Economy Recover in 2021?

As global lockdowns have been eased since June 2020, there has been growing economic evidence of a rebound in global manufacturing output, retail sales and world trade. The JP Morgan Global Manufacturing PMI rose to a 25-month high of 52.3 in September, up from 51.8 in August. The headline PMI has signaled expansions throughout the third quarter of 2020.

Out of the 29 nations for which PMI data were available, 21 registered growth during the latest survey month. New orders at their quickest pace in almost two-and-a-half years, boosted by the first increase in exports since August 2018.

Many countries have returned to positive expansion in their manufacturing sectors. The US and almost all the EU countries surveyed recorded manufacturing sector expansion during September.

The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index posted 53.2 in September,

broadly in line with 53.1 seen in August. The rate of expansion was the second-fastest for almost a year, as panelists continued to note strengthening demand conditions following the marked contractions seen throughout the second quarter.

The IHS Markit Eurozone Manufacturing PMI signaled an acceleration in growth of the manufacturing economy during September. After accounting for seasonal factors, the index posted 53.7, up from 51.7 in the previous month.

September marked the strongest growth in over two years and improved operating conditions have now been signaled for three months in a row.

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Global Manufacturing PMI

Source: IHS Markit, J.P.Morgan

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>>> In the UK, the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index remained strong in September, at 54.1.

In the APAC region, many countries showed manufacturing expansion, including China, Australia, India and Vietnam.

However, Japan and Indonesia still recorded moderate contractions in their manufacturing sectors.

China Leads APAC Recovery The Chinese economy has been the earliest to recover from the pandemic, with recovery having gathered momentum during the second quarter of 2020. The headline seasonally Manufacturing PMI sa, > 50 = improvement since previous month

Sep ‘20

adjusted Caixin China Manufacturing Purchasing Managers’ Index continued to show expansion for the fifth successive month in September, at 53.0. Notably, the latest reading rounded off the best quarterly performance since Q4 2010.

The rate of new orders for China’s manufacturing sector was the steepest recorded since the start of 2011. Stronger external demand also helped to lift sales, with new export business expanding at the quickest pace since August 2017.

China’s exports have also shown resilience despite the global recession, with total exports rising by 9.7% y/y in August 2020, helped by strong growth in exports of medical equipment, pharmaceuticals as well as electronics products.

China’s success in containing the pandemic relatively quickly has helped to support the gradual recovery of domestic consumption, with retail sales having returned close to preCovid levels by August 2020. Domestic tourism has also rebounded significantly by the time of the Golden Week holiday in early October.

A total of 97 million domestic journeys were made on the first day of the holiday, on October 1, equivalent to 74% percent of journeys made on the same day last year, according to China’s Ministry of Culture and Tourism, while tourism spending was at around 70% of the previous year’s level.

Reflecting this resilient economic performance, China is expected to be one of the only large economies that will post positive growth in 2020, albeit at a much reduced pace of around 1.7%, compared with 6% in 2019.

Meanwhile other Northeast Asian economies such as South Korea have also been successful in containing their domestic Covid-19 pandemics, which has helped to boost domestic consumption spending and mitigate the impact of the global recession.

Sources: J.P.Morgan, IHS Markit, Unicredit Bank Austria, Caixin, Davivienda, BME, HPI, AIB, Jibun Bank, NEVI, AERCE, Istanbul Chamber of Industry, CIPS

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In South Asia, the Indian economy has rebounded in the third quarter of 2020 as lockdowns have been eased, despite the escalation in the daily number of new Covid-19 cases. The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index surged higher from 52.0 in August to 56.8 in September, signaling back-to-back improvements

October 2020 | The ICISA INSIDER

in the health of the sector, reaching the highest level in over eight-and-a-half years.

Manufacturing output has also bounced back during the third quarter of 2020 in Southeast Asia. The Manufacturing PMI indexes for Singapore, Malaysia, Indonesia, Vietnam, Philippines and Thailand showed significant rebounds during the third quarter of 2020.

The substantial recovery in Asian industrial production and exports is reflected in the Asian electronics sector, which has rebounded as lockdowns have eased in key consumer markets like the US and EU. The electronics manufacturing industry is an important part of the manufacturing export sector for many East Asian economies, including China, South Korea, Taiwan, Malaysia, Singapore, Philippines, Thailand and Vietnam. The Global Electronics PMI’s output index (which measures changes in production) returned to positive territory in August, reaching 50.4, signaling slight expansion. This is in comparison with severe contraction in April, as reflected in the index reading of 33.9 for that month.

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India Manufacturing PMI sa, > 50 = improvement since previous month

Sources: IHS Markit

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The ICISA INSIDER | October 2020

>>> Navigating the Risk Landscape for 2021 Apart from the continuing risks and uncertainties relating to the Covid-19 pandemic, a wide range of geopolitical and macroeconomic risks continue to confront the world economy in 2021. Key risks include the still uncertain outcome of the EUUK negotiations for the Brexit trade deal, the escalating USChina trade war, growing geopolitical tensions in the Eastern Mediterranean region, and the border confrontation between China and India.

Join over 3600 other industry experts in the ICISA group on LinkedIn.

The US-China Trade War: While a Phase One bilateral trade deal was agreed between the US and China in December 2019, the pandemic has derailed efforts by China to achieve the trade targets set, and bilateral trade negotiations have been continuing to try to set the trade deal back on track.

Meanwhile, the US-China technology war has also escalated significantly during 2020, with a growing number of Chinese technology firms having been placed on the US Department of Commerce “entity list”, resulting in significant restrictions on the ability of US firms to do business with these companies.

In response, China has also created its own “unreliable entity list” under new regulations which took effect in September 2020.

Under the new rules, China can take measures to prohibit foreign firms listed as unreliable entities from engaging in import, export and investment in China. The potential sanctions that could be applied include: restricting or prohibiting the foreign entity from engaging in China-related import or export activities; ● restricting or prohibiting the foreign entity from investing in China; ● restricting or prohibiting the foreign entity’s relevant personnel or means of transportation from entering into China; ●

Supply Chain Vulnerabilities: The protracted disruption of industrial production in various industrial economies during the first half of 2020 has further intensified pressures on companies to diversify their supply chains to reduce vulnerability to such disruptions. Due to the large concentration of industrial production capacity in China, diversification of manufacturing production away from China has already been underway over the past decade, initially driven by rapidly rising manufacturing wage costs in coastal provinces of China. The escalating USChina trade war since 2018 has further intensified this process of supply chain diversification, as firms shifted some production of manufacturing exports for the US market away from mainland China in order to mitigate the impact of US tariff measures. The Covid-19 pandemic has become a further driver for this supply chain diversification process. |

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Due to the Covid-19 pandemic, governments in many countries worldwide are responding to vulnerabilities exposed in their supply chains for critical medical equipment as well as key pharmaceutical products. The disruption to production of key medical equipment in China, which is a leading global supplier of many critical products such as surgical masks, respirator masks and protective clothing, as well as surging

global demand, have highlighted supply chain vulnerabilities.

In response, governments in some countries have taken emergency measures to establish domestic manufacturing capacity for critical equipment, as well as to create or increase domestic production facilities for essential pharmaceutical products.

IHS Markit Global Electronics PMI, output and new orders Survey index, 50 = no change on prior month

Sources: IHS Markit

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The ICISA INSIDER | October 2020

>>> In order to help reduce supply chain vulnerabilities for Japanese firms, the Japanese government has created a Yen 23.5 billion (USD 220 million) fund in May 2020 to help Japanese companies to diversify their supply chains by increasing their production capacity by either reshoring back to Japan or shifting production to the ASEAN region. This fund was created in response to significant supply chain disruptions for Japanese firms that occurred during the extended manufacturing production shutdown in China in February as a result of the pandemic.

The first round of allocations to companies was announced in July 2020, when the Japanese government approved 57 applications by companies for financial support with supply chain diversification to reshore back to Japan, with another 30 firms receiving assistance to shift supply chains to ASEAN countries. In the second round, 1,670 applications have been made, with the government decision on which companies have been successful expected to be made in October 2020. The second round will also allow applications by firms planning to shift supply chains to India and Bangladesh to be considered for financial assistance.

US multinationals have already been diversifying their supply chains away from China over the past decade, in response to rising Chinese wage costs as well as the impact of the

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US punitive tariffs imposed on Chinese products during the US-China trade war. Southeast Asia has been a significant beneficiary from this supply chain diversification process, with significant diversion of US export orders away from China to Vietnam in 2019.

Brexit Risks: Over four years have passed since the UK referendum to leave the EU, and negotiations are still underway to try to find an agreement on the terms of Brexit.

The risk of a “Hard Brexit” where the UK ends its transition period for leaving the EU without any deal is assessed to pose the greatest downside risks to the UK economy of the various potential exit scenarios.

With the UK economy already in recession in 2020 due to the pandemic, a “Hard Brexit” scenario could result in a protracted recession for the UK economy that extends into 2021.

Cybercrime Risks: The Covid-19 pandemic has highlighted the importance of considering low probability but high impact systemic risks that could create major economic shocks for nations, governments and companies. The accelerating pace of digital transformation worldwide during the past decade has increased the risks from cybercrime, including by criminal organizations, terrorist organizations or state-sponsored groups.

October 2020 | The ICISA INSIDER

Economic Outlook for 2021 With Covid-19 vaccines expected to be deployed widely by mid-2021, the world economy is expected to return to positive growth of 4.4% year-on-year in 2021, after contracting by an estimated 4.8% y/y in 2020. The US and EU are expected to show firm positive growth during 2021. In the Asia-Pacific region, China is expected to lead the region’s economic recovery, with Chinese GDP growth forecast to be around 7% in 2021. After a severe recession in 2020, the Indian economy is also expected to rebound in 2021, growing at a pace of around 9%. Most of the major economies in the APAC region are also expected to show strong growth rebounds in 2021, boosted by buoyant growth in industrial production and exports.

However, a wide range of geopolitical and economic risks and uncertainties could derail this positive base case economic outlook for 2021. At the forefront of concerns are uncertainties about the timing of rollout of Covid-19 vaccines. If the deployment of Covid-19 vaccines becomes significantly delayed, this poses the risk of new waves of Covid-19 infections breaking out in various countries worldwide. This could significantly constrain and delay the timing and momentum of global recovery during 2021.

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The ICISA INSIDER | October 2020

ANNOUNCEMENTS Stuart Ramsden has been named as Regional Director UK & Ireland of Atradius Stuart Ramsden has been named as Regional Director UK & Ireland for leading trade credit insurer Atradius with effect from 1st July 2020. Stuart, who has been with the firm since 1991 succeeds Alun Sweeney who steps down from the role he has held for over 10 years.

Stuart Ramsden Regional Director UK & Ireland Company: Atradius

As Regional Director, Stuart will continue the positive momentum that UK & Ireland region has established. During his time at Atradius, Stuart has held a number of senior positions including 10 years as Country Manager for Atradius Ireland and since June 2016, has been heading up the UK & Ireland commercial activities, working closely with outgoing Regional Director Alun Sweeney. With over 20 years’ experience in the Credit Insurance industry and a proven business acumen, his appointment ensures a bright future for Atradius in UK & Ireland.

Andreas Tesch, Chief Market Officer of Atradius said: “Atradius is delighted to welcome Stuart to our leadership team and I congratulate him on his appointment as Regional Director UK & Ireland. His vast experience in trade credit insurance ably equips him to take the baton from Alun Sweeney and continue the positive momentum that our UK & Ireland region has established.”

Placido Furnari appointed as member of the Executive Committee of COSEC On the 3rd September 2020 Placido Furnari was appointed as member of the Executive Committee of COSEC (leader in Credit and Bond insurance in Portugal), assuming claims and risk portfolio departments.

Placido Furnari has over 20 years of professional experience in Euler Hermes, COSEC shareholder, on information, underwriting, risk and claims areas.

Recently, Placido lead the risk underwriting department at Euler Hermes Italy and also risk, claims and information at Euler Hermes Greece.

Placido Furnari Member of the Executive Committee of COSEC (leader in Credit and Bond insurance in Portugal) Company: COSEC

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October 2020 | The ICISA INSIDER

James Deloz appointed as Group Chief Underwriting Officer of Credendo Group On September 1, 2020 James Deloz has been appointed to the post of Group Chief Underwriting Officer of Credendo Group. This new position was created to guarantee uniform and best practices across our group’s entities, aligned with the overall strategic objectives, organisational set-up and risk appetite. It encompasses the coordination of all risk underwriting activities in the group, except for Credendo ECA’s core activity.

The Group Chief Underwriting Officer will also act as chair of the Group Underwriting Committee. James Deloz will combine his new function with his current position as Head of Underwriting and Credit Information for Credendo Short-Term Non-EU Risks.

James joined CREDENDO eight years ago, with 27 years of professional experience, mainly in credit and working capital management in the chemical and petrochemical industry, as well as in the factoring industry.

James Deloz Chair Company: Credendo

In his role as Head of Underwriting and Credit Information of CREDENDO Short-Term Non-EU Risks, a role which he will combine with his new function, James and his team improved processes and he played a pivotal role in the sustainable improvement of the company’s results.

Credendo intends to merge all its speciality lines in one company Credendo is pleased to announce the intended merger between its two specialised trade credit insurance entities, Credendo – Excess & Surety and Credendo – Single Risk, planned for the first semester of 2021. This change is part of Credendo’s vision of offering comprehensive trade credit insurance solutions available for all sizes and types of business and for risks in any location worldwide.

Eckhard Horst General Manager of Credendo Company: Credendo

The merger – still subject to all necessary regulatory approvals – aims at creating a new major player in the specialised trade credit insurance market by combining three strategic business lines for the marketable risks in trade credit, surety and single risk, in one entity.

In addition to helping us achieve greater portfolio diversification, the merged company, with a combined capital of EUR 135 million, will be able to open up to new markets, and access new clientele benefiting from a scale-up of resources and expanded distribution channels.

Credendo – Excess & Surety shows continuous growth as a specialised entity providing excess of loss, top-up cover and surety bonds on the European market. Eckhard Horst, General Manager of Credendo – Excess & Surety said, “Becoming a bigger player supports our business strategy of developing further capabilities to address growing demand from large corporates and SMEs, notably for surety business. It serves our objectives of deploying our products in additional markets where Credendo – Single Risk is active and developing innovative technology solutions, building on the new platform Credendo Booster.”

A European footprint With its headquarters in Brussels and teams in nine countries (Austria, France, Germany, Italy, Luxembourg, the Netherlands, Poland, Spain and Switzerland), the new entity will operate under the management of Eckhard Horst, currently General Manager of Credendo – Excess & Surety, with the support of three Business Lines Managers, each heading a specialised credit insurance line. Based in Amsterdam, Annet de Grooth will be coordinating the surety business. Marco Censi will be coordinating the excess-of-loss business from Italy, and Kerlijne Van Steen, who recently joined Credendo – Single Risk in Switzerland, will be coordinating the single-risk business line from there.

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The ICISA INSIDER | October 2020

ANNOUNCEMENTS Stefan Herschel appointed as Head of Credit Lines Germany of Zurich Insurance plc (Germany) Zurich Insurance plc (Germany) appointed a new Head of Credit Lines Germany.

On the 1st July 2020, Stefan Herschel took up the position of Head of Credit Lines Germany of Zurich Insurance plc (Germany). In his new role Stefan is responsible for the Credit Lines Business (Surety and Trade Credit Insurance/Delcredere) in Germany.

Stefan joined Zurich Insurance Group in 2006 and worked for Group Risk Management at Zurich Insurance Group Headquarters in Zürich.

Stefan Herschel Head of Credit Lines Germany Company: Zurich Insurance plc

Camilo Rodriguez promoted to Head of International Credit & Surety of AXIS Re On September 15, AXIS Re announced Camilo Rodriguez’s promotion to Head of International Credit & Surety in its Global Markets division.

Camilo first joined AXIS Re in 2012 as a Vice President Underwriter for Credit and Bond.

Most recently, he held the role of Credit & Bond Head of Latin America responsible for strategic planning and underwriting within the region.

Camilo Rodriguez Head of International Head of Credit & Surety Company: AXIS Re

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The Head of International Credit & Surety being filled by Camilo is one of two new global co-lead roles created to lead the Mortgage, Credit & Surety team. AXIS Re is recruiting to fill its new Head of North America Mortgage and Surety position which will complement Camilo’s new position.

October 2020 | The ICISA INSIDER

A Guide to Trade Credit Insurance By the International Credit Insurance & Surety Association A practical and accessible industry-wide reference on Trade Credit Insurance, written by a team of industry experts.

This compact volume is a practical guide for anyone interested in Trade Credit Insurance. The International Credit Insurance & Surety Association (ICISA) presents an approachable but detailed guide written collaboratively by carefully selected industry experts. The guide describes the ‘lifeline’ of the credit insurance product, from the initial application stage to the expiration phase of the policy, including practical use aspects for credit managers. The volume offers compact information on the history of trade, the need for protection against trade credit risks, and solutions offered by credit insurance providers.

The focus is on short term credit, including whole turnover policies and single risk policies.

Readership Suitable for anyone interested in Trade Credit Insurance, from credit managers to policymakers.

Key selling points • • • •

Collaboration of a diverse group of experts from top organizations around the world Written in an approachable style, accessible to the non-specialist Includes extended glossary of key terminology Includes a list of relevant resources for further reading

Content Foreword; Introduction; Disclaimer; 1.What is trade?; 2. What is trade credit insurance?; 3. Product types; 4. Risk types; 5. Typical set-up of a trade credit insurance contract; 6. Premium, the price for cover; 7. Day-to-day policy management; 8. Buyer risk underwriting in trade credit insurance; 9. Debt collection; 10. Imminent loss and indemnification; 11.

Renewal, expiry, termination of a policy; 12. Single risk business; 13. The single risk insurance market: Private and public players; 14. Reinsurance of Trade Credit Insurance; Trade Credit Insurance resources; Glossary of trade credit terminology

About the Author(s) / Editor(s) The International Credit Insurance & Surety Association (ICISA) brings together the world’s leading companies providing trade credit insurance and surety bonds. ICISA promotes technical excellence, industry innovation and product integrity, as well as addressing business challenges generated by new legislation.

Where to order my copy?

To order a copy of the book ‘A Guide to Trade Credit Insurance, ‘ please visit www.amazon.com

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October 2020 | The ICISA INSIDER

ICISA Members

ICISA Herengracht 473 1017 BS Amsterdam The Netherlands +31 (0)20 625 4115 secretariat@icisa.org www.icisa.org

Registered Number: 64391736 24

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