Trade Credit Insurance and consumer credit A different

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

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

ICISA members 2

ICISA members 2

Credit Insurance is not a Financial Guarantee! • Conditional • Direct link with delivery

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

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

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

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

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)

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

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

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 [email protected] org www. stecis. org 10

THANK YOU! 11

THANK YOU! 11