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INSURANCE: In Challenging Times Companies Rely on Surety Bonds


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The members of the International Credit Insurance and Surety Association (ICISA) met recently in Milan for their 71st Annual General Meeting to discuss market and industry developments.

Concern was raised about the slow economic recovery, especially in Europe, as it continues to restrict the willingness of companies to invest and trade. Insolvencies are increasing and consequently a continuing rise in premium levels is reported by the trade credit insurance and surety members.

“In 2012, South Africa’s merchandise exports to Europe fell 7.5% to R168.4 billion from R182.1 billion the previous year,” comments Luke Doig, Senior Economist, Credit Guarantee Insurance Corporation. “Consequently, the European continent’s share of our exports fell from 25.9% to 23.5%. There has been an improvement in this trend in the first four months of 2013 with merchandise exports to Europe rising 16.6% to R61.7 billion or 25.2% of total exports, but this nevertheless highlights the challenges for exporters in endeavouring to find alternative markets.”

Theo Reddi, General Manager Exports at Credit Guarantee, said that the rising risk of insolvencies in Europe is a cause for concern, particularly given that the Company’s insured turnover to Europe is one of the highest compared to other continents. “We, however, have the necessary infrastructure, international network, comprehensive database and transactional history to monitor and regularly review these risks to be able to provide the necessary protection that our clients need during these turbulent times. More importantly, we continue to underwrite in these markets and support our clients exporting to these markets.”

The following salient points emerged from the discussions at the ICISA AGM:

· Insured exposure increased by 4.4% to € 1.92 trillion (2011: € 1.84 trillion)

· Premium increased by 3% to € 6.14 billion (2011: € 5.96 billion)

· Claims paid to clients increased by 12% to € 2.93 billion (2011: € 2.62 billion)

· Insured exposure is at all-time high in spite of high risk environment with growing number of insolvencies

· Increase in claims paid to clients is to a large extent due to insolvencies in Europe

In times of increasing insolvencies, more companies value trade credit insurance as an effective management and risk control tool. It has a positive effect on the cash flow management and business continuity of members’ clients and is therefore valued as a management tool in an environment concerned with an increasing number of bankruptcies. ICISA trade credit insurance members paid out almost three Billion Euros in claims to clients during 2012. This demonstrates the soundness and financial flexibility of the industry. Policyholders received almost three Billion Euros for their unpaid receivables enabling them to continue trading in spite of these losses.


· Insured exposure remained flat at € 269 billion (2011: € 268 billion)

· Premium increased by 2.4% to € 2.11 billion (2011: € 2.06 billion)

· Claims paid to clients increased by 26% to € 914 million (2011: € 727 million)

The surety claims picture worsened compared to previous years. ICISA surety members reported increased claims frequencies due to poor performing transport and construction sectors. Pre-qualification vetting of contractors reduced project disruptions and saved costs for surety bond beneficiaries.

USA Platform

Members of ICISA further decided to increase the regional focus of the Association by creating a USA platform. The Asia Sub-committee had already proven to be a strong pioneering initiative after its inaugural meeting last year. In order to better assist trade credit insurance members operating in the USA, it was decided to continue the Association’s regional focus by creating this new platform.

‘Supporting trade since 1928’

This year ICISA celebrates its 85th anniversary with the tagline ‘Supporting trade since 1928’ and the release of the first industry-wide written book on trade credit insurance. This reference book has been written by industry experts from ICISA’s member companies. These companies jointly represent over 95% of the world’s private trade credit insurance industry. The admittance of on average two new member companies each year shows the association is vibrant and that it continues to play its role supporting its members.


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