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The total annual premium income for trade credit insurance globally for 2008 was over $8 billion, of which almost 90% was accounted for by the three major monoline credit insurers: Euler Hermes at 36%, Atradius with 31%, and Coface with 20%. In turn, these three are insured by a similar panel of reinsurers. In addition, other major companies are involved in credit insurance, such as Chartis (formerly AIG), QBE, various Lloyd’s syndicates, and ACE — as well as the government-owned or backed export credit agencies (ECAs).
During the past five years, we have seen a massive growth in the exposure levels of the major credit insurers as they have competed for market share. Premium income has not grown at the same rate because the insurers have competed vigorously on price and taken on increasingly marginal risks. This policy has not proved robust enough in the current climate, and the credit insurers are under pressure to correct the risk/reward imbalance.
The severe, widespread, and persistent economic downturn has featured the retrenchment of bank credit, the 'drying up' of letters of credit, and the virtual disappearance of the secondary banking market. These conditions have resulted in a significant rise in payment defaults and corporate failures, which in turn, has been reflected in a significant increase in claims.
Trade Credit Insurance and the Global Credit Crisis provides an overview of the current issues facing credit insurers, examines the resultant reductions in cover, describes what Marsh and others have done to address financial and insurance marketplace conditions, including certain government-backed arrangements, and provides some suggestions for
the future.
Read Trade Credit Insurance and the Global Credit Crisis in its entirety.
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Read Trade Credit Insurance and the Global Credit Crisis in its entirety.
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