Trade Credit Insurance and consumer credit A different

Trade Credit Insurance and consumer credit A different business model Robert Nijhout – Executive Director ICISA

ICISA members 2

Credit Insurance is not a Financial Guarantee! • Conditional • Direct link with delivery of goods or services

Reasons for non-payment n. The buyer is insolvent, i. e. declared bankrupt or allowed to defer payments following a court or similar decision n. The buyer has absconded, which amounts to a type of fraud n. The buyer is able to pay but cannot pay due to currency restrictions or a steep devaluation n. The goods never arrived and the buyer considers himself absolved from payment 4

Role of Trade Credit Insurer Policyholder Goods / Services Premiums Claim Payments Premiums Credit Insurer Claim Payments Reinsurer 1 Reinsurer 2 Payments Default Reinsurer n Buyer 1 Buyer 2 Buyer n Other Trade credit insurers provide three main services: • • • Risk management through ongoing assessment of present and future creditworthiness of buyers Collection services for unpaid debts Claims payment for delayed or unpaid receivables 5

What is credit insurance? Trade credit insurance insures suppliers against the risk of nonpayment of goods or services by their buyers: • buyer situated in the same country as the supplier (domestic risk) • buyer situated in another country (export risk) What is covered? • non-payment as a result of insolvency of the buyer • non-payment after an agreed number of months after due-date (protracted default) • risk of non-payment following an event outside the control of the buyer or the seller (political risk cover), e. g. risk that money cannot be transferred from one country to another.

Non-payment when solvent n. The buyer is solvent, but does not (want to) pay n. Payment is not received for (other) unknown reasons Protracted Default: • 6 -month waiting period • Considered equal to insolvency under the policy 7

Technology Trends | Digitalisation n “New” on-line retail platforms (e. g. Amazon and Alibaba) already account for 12% of the global trade. n Digitalisation is approaching an advanced level which enables significant changes of existing business models n Successful translation of B 2 C concepts to B 2 B global market places. n Standardised trade finance flows allow seamless connectivity between involved parties 8

Technology Trends | Digitalisation n Fintech, Insurtech and Blockchain developments outpace regulation and legal framework n connectivity with customers, brokers and 3 rd parties n meeting future customer expectations by using digital technology to interact with them n working together with digital goliaths 9

The Trade Credit Insurance & Surety Academy • Training Seminars – Basic and Advanced Training Seminars • Trade Credit Insurance • Surety Bond Insurance – Participants 15 max. • Tailor-made in-house info@stecis. org www. stecis. org 10

THANK YOU! 11