16.12.2022

2022 has been an outstanding year for many reasons…but what more can our market do?

The insurance market as a supporter of banks and development finance institutions has had continued to show it’s capabilities to provide products that provide efficient distribution tools for it’s client. Insurers have regularly partnered with banking clients to help them increase their lending into certain industries and countries when the other distribution options have been unavailable or uneconomic. This willingness to align themselves with their clients through macro-economic and commodity cycles has shown the maturity and resilience of the insurance providers in our market.

We have continued to expand the range of assets and structures covered by the non-payment insurance product. We are very proud of the market’s capacity to support transactions ranging from 30 days to 20 years and across the full breadth of our clients loan, bond and derivation portfolios. The insurers are a knowledgeable and experienced partner and their willingness to learn and develop a deep understanding of new industries or structures always impresses our clients.

To this end, we must thank the underwriters and their insurance companies for continuing to develop meaningful and strategic relationships with our clients.

Now for the “but”…our product has always represented a small (but profitable) percentage of the insurers global insurance premium income and the capacity available for sizeable infrastructure or corporate financings is often only a fraction of the total lending capacity deployed by our clients. We talk about our product as an enabler of infrastructure projects, a supporter of global trades flows and a tool that can mobilise development financing but I would suggest that we need to continue to challenge insurers to look to grow their portfolios and push their management to allocate more capital to this product line. We are not looking to push insurers risk appetite but instead asking that they push their management boards to recognise the value and growth potential that they can achieve if they are allocated more internal capital. To support these discussions our market needs to be willing to continue to share data in as transparent and detailed volume as possible. Centralising the collection of such data or at least beginning to establish some data standards for our market will serve to provide insurers, clients and regulatory bodies with more clarity as to the market’s capacity for sustainable growth. Brokers are already supporting this data gathering on the claims side, but we could certainly all provide more meaningful structured data if it was independently collated.

We are not ignorant to the fact that there are competing demands on capital within the insurers but our market can have profound impact on closing the global trade finance gap, supporting climate and adaption finance and the roll-out of infrastructure in developed and developing economies.

In order to support what we hope will be a growing risk capacity from insurers, we feel that our market needs to maintain it’s capacity for innovation. We like to believe that we are often at the forefront of challenging insurers to support clients in more efficient and scalable formats. This willingness to step back and consider how they can provide “more with less” through portfolio transactions or blended finance solutions will only serve to scale the product’s value to it’s clients.

In summary we are not advocating for widespread change but instead hoping that the success of our product and market’s risk taking capacity is scaled up to help meet the needs of our clients and the wider global economy.