Embracing Growing Opportunities for Credit Insurance and PRI in Uncertain Times

The trade and credit insurance universe are in flux with potentially game-changing developments over the next two years, which governments, international gatekeeper organizations, multilateral and private insurers, export credit agencies, financial institutions, and the export/import fraternity would ignore at their peril. These include trade digitalization, transitioning to ISO 20022, embedding Climate and ESG considerations in the trade playbook, the adoption of Electronic Trade Documentation, the implications of the Net-Zero Export Credit Agencies Alliance (NZECA) launched at COP28, and advancing the role of women in credit insurance. Dr. Khalid Khalafalla, Officer-in-Charge, ICIEC explores the above structural regulatory trends and initiatives for the credit and PRI industry.?

In 2023, the export credit industry saw over USD 3 trillion in new support, with a 40% increase in MLT business and record renewable energy commitments. The strong growth promises a positive outlook for 2024 and beyond.

It is not surprising that the Berne Union (BU) Spring Meeting in Oslo in April 2024 focussed on innovation in its various forms - covering topics ranging from technology to new and innovative products and how the export credit insurance industry is adapting to a swiftly changing global environment.?

?The export credit industry, says the Union, emerged from the pandemic strong with substantial growth in support provided for cross-border trade and investment as members ramp up commitments across key sectors and geographies. In fact, 2023 was an encouraging year for export credit with BU members providing over USD3 trillion in new support for cross-border trade, with expansion across almost all business lines, which augurs well for 2024 and beyond. The overall performance metrics for the industry in 2023 include:??

? A 40% increase to over USD165 billion for MLT business, following strong growth in manufacturing, infrastructure, and transport sectors alongside a continuing rapid growth in renewable energy investments.??

? A particularly strong year for ECAs who grew their MLT business by 50% following several years of relative stagnation throughout the pandemic. Private CPRI underwriters continue to build on the strong year-on-year growth they have recorded since 2020.??

? The industry is drawing upon an increasingly flexible product suite with volumes of untied credit support increasing 30% to over USD50 billion in new commitments in 2023.?

? Climate and the green transition are the main drivers of new opportunities with a record USD20.5 billion in reported new commitments for renewable energy across 68 countries in 2023.??

? BU members provided an estimated USD98 billion in total support for wider green, climate and energy-transition-related transactions in 2023 – 5 times the commitments to renewable energy production alone and a significant portion of total long-term finance supported across MLT and PRI business.??

? Members are attuned to a heightened political risk environment, with both sovereign defaults and corporate insolvencies driving an uptick in claims. Over USD9 billion of claims were paid, with a significant spike in MLT political risk claims in FY 2023 largely due to a distressed period for sovereign debt.?

?? Geopolitical risk and armed conflict have become an increasing concern for members.??

? ST claims continued to rise along with insolvencies, with levels manageable. MLT commercial claims continued to fall with strong recoveries in the transport sector.?

Click here to read more about ICIEC's 2024 Q1 & Q2 Pearl Jubilee 30-Year Special Newsletter.

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