The future of structured trade credit insurance

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06 August 2009

Specialised trade credit insurance looks set to take its biggest hit since the Asian crisis. Dickon Harris analyses what this will mean to players active in the market and why, despite the gloom, trade insurers seem surprisingly upbeat.

Inevitably the specialised insurance market that covers trade finance has been hit by the crisis. Brokers and insurers have been talking a hard market for over a year but it is only now that the market is really beginning to experience the full-scale of the predicted claims. Underwriters each tend to divide the products differently but the insurance market for trade can be broadly be split between two areas. Political risk insurance (PRI), which protects investments and loans against loss or default due to country or political risk events, and credit risk insurance, which offers protection from counterparty or borrower payment default. Out of those two areas it is credit risk that has seen the largest number of claims, both through short-term whole turnover trade credit insurance, which represents the majority of the premium income in this area, and structured trade credit insurance, which represents a smaller but growing product line....

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