While domestic credit insurance is still a small market in the United States, export credit insurance is even smaller, according to Evan Freely, senior vice president of Willis of New York, a brokerage firm. "The majority of coverage is still for domestic, but export is growing," he says.
"When we do see it, it is usually a request for single risk coverage." This involves covering one buyer or obligor. In the past, underwriters tended to push for portfolio coverage, Freely says. Now, he is seeing more flexibility with underwriters to write risk cover, as long as it is not an adverse selection.
Following Sept. 11, 2001, the export credit insurance market was somewhat hard, since so much capital went to the traditional property/casualty markets and away from the specialty lines, such as credit insurance.
"However, this is starting to come back in now as more reinsurance is coming into the market," he says. "It is also starting to be reflected in the pricing."
Banks continue to be strong drivers of the export credit insurance product. As a result underwriters are becoming more flexible in terms of tailoring their wording to cater to bank requirements.
Freely expects the export credit insurance market to continue to grow. "We will see more and more underwriters being willing to underwrite single risk and select risk policies," he says.
Freely also offers an important recommendation for risk managers in working with credit managers on export credit insurance: Make sure credit managers and other company executives look at all the options.
"Credit managers may just want to look at one or two carriers," he says. "They need to know there are several. As such, they should use the whole market to get feedback."
When they do this, they may find some other underwriters who can do a lot more for them than they even realized was possible. "Risk managers are better at understanding these opportunities," he says.
April 15, 2005
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