Committee of Underwriters

James Deloz

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.

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.

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.