Berne Union 2018
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Contents
1 Introduction
Berne Union elected officials, A note from the hosts of the 2018 AGM 19 committees and secretariat 6 Nicolas Dufourcq, CEO, Bpifrance
Foreword 13 Topi Vesteri, president, Berne Union
2 Data and Statistics
Berne Union totals 22 2018 H1 in review: business is stable, but risks are high and unpredictable 31 Short-term export credit insurance Paul Heaney, Associate Director, Berne Union Medium- and long-term export credit insurance
Investment insurance
3 Expert Analysis
MEMBER SPOTLIGHT Sinosure: helping corss-border E-commerce sellers in an expanding global market 60 New member profile: BANDEX 39 Chen Jichao, underwriter, Sinosure and Zhou Huihan, underwriter, Sinosure New member profile: ECGC Z 41
The Prague Club 25 years on 43 MEDIUM- AND LONG TERM EXPORT CREDIT Malcolm Stephens and Lennart Skarp INSURANCE
Interview: Private Political Risk Insurance 64 INNOVATIONS IN TRADE TECHNOLOGY Christina Westholm-Schroder, chief underwriter, senior vice president, Sovereign Risk Insurance, and Nuria Gorog, senior vice Radical innovation in trade finance 47 president, head of credit and political risk, Christophe Spoerry, co-founder, Euler Hermes Continental Europe, Zurich Digital Agency ECAS weathering stormy seas 68 Assessing startup potential in insurtech 50 Hendrik Holdefleiss, chair of the Berne Martha Notaras, partner, XL Innovate Union MLT committee, and head of division underwriting and risk management, Euler The economic impact of smart ledgers Hermes on world trade 52 James Pitcher, associate, Z.yen Group and Credit insurance for project finance 71 programme director, Distributed Futures Mark van der Does, assistant vice president, Marsh and Abbey Sturrock, public agency, Customer expectations drive digital senior vice president, Marsh (Singapore) transformation while disruptive technology enables it 54 The LMA moves into the export finance market 77 Jérôme, Pezé, CEO and founder, Tinubu Square Kam Mahil, director (legal), LMA and Ashley McDermott, senior associate, Clifford Chance
SHORT TERM CREDIT INSURANCE APPROACHES TO SUSTAINABLE DEVELOPMENT Building a digital future for short-term credit insurance - Liberty Specialty Markets online The complementary role of official platform, Toredo 57 development finance 81 2 Chris Hill, senior underwriter - global financial Paul H.J. Mudde, consultant, Sustainable risks, Liberty Specialty Markets Finance & Insurance Berne Union 2018 CONTENTS 3 Expert Analysis continued
Berne Union – Offenburg University Risk outlook 129 Partnership on ‘Financing. Impact. John Lorié, chief economist, Atradius, Ludovic Together’ 91 Subran, chief economist, Euler Hermes and Mariane Søndergaard-Jensen, director, EKF Julien Marcilly, chief economist, Coface and Christine Lund Andersen, senior advisor, EKF NEW PRODUCT DEVELOPMENTS Sustainable insurance 94 Thomas Mahl, managing director, SFR Would gradual de-dollarization boost trade? 132 Consulting and Franz Karman, managing Harald Hirschhofer, senior advisor, TCX and director, SFR Consulting Niels Vermeijden, vice president, TCX
Winds are changing for wind financing 98 Extending support to Indian MSMEs 134 Christian Ølgaard, deputy CEO, EKF Sunil Joshi, general manager, country underwriting and international relations, ECGC
THE REGULATORY LANDSCAPE Finally: An export credit agency for Ukraine? 138 Dr Hans Janus, lawyer and consultant Export credit competition goes beyond the arrangement 100 Pekka Karkovirta, chairman of the participants REGIONAL BUSINESS DEVELOPMENTS to the Arrangement on Officially Supported Export Credits, and vice president, Finnvera The role of exports in Spain’s post-crisis recovery 140 Export credit at the OECD: Good Beatriz Reguero Naredo, director, CEO state governance and sustainability 104 account business, CESCE Silvia Gavorníková, chair of the Export Credit and Credit Guarantee Working Party, and HBOR: 20 years of export credit insurance director of international relations, EXIMBANKA in Croatia 142 SR AOFI: Serbia has good news… 145 IWG: Time to lay the foundation stones 108 Michal Ron, IWG secretary general, managing director, head of international business, SACE Unlocking the potential of African export credit market for trade and economic transformation 146 Export finance and financial regulation 110 Professor Benedict Oramah, president and Henri d’Ambrières, advisor, export, trade and chairman of the board of directors, African project finance, HDA Conseil Export-Import Bank
Economic development and protecting trade 149 POLITICAL RISK ENVIRONMENT Vinco David, secretary general, Berne Union
Political risk likely to moderate returns 114 Simon Coote, deputy director, Oxford Analytica
Trade at war 117 Jean Francois Lambert, founding partner, Lambert Commodities
Sovereign debt restructuring and debt swap provisions 121 Paola Valerio, head of international relations, SACE SIMEST
Venezuela: three scenarios 123 David H. Anderson, president, Anderson Risk Consultants and William Green, founder and managing partner, TDI
4 Member Directory
Berne Union members 158 3 Berne Union 2018 Berne Union 2018
Introduction1 Berne Union 2018
The Berne Union: Who’s Who 2018
Berne Union Leadership
The Management Committee consists of:
President Vice President
4 Committee Chairs 13 Member Organisations
The 13 Member Organisations are institutional positions, held by the two largest volume members from each of the ST, MLT and INV Committees, plus seven additional members drawn from amongst all four Committees on a voluntary, rotating, basis. All positions are held for a term of two years.
President: Institutional Members: Topi Vesteri (FINNVERA) ATRADIUS
Vice President: COFACE Mandisi Nkuhlu (ECIC SA) EULER HERMES
Short Term Committee Chair: BPI FRANCE Verena Utzinger (SERV) NEXI
Medium/Long Term Committee Chair: SINOSURE Hendrik Holdefleiss (EULER HERMES) ECGC
Investment Committee Chair: EXIMBANKA SR Christina Westholm-Schroder HBOR (SOVEREIGN) KSURE
Prague Club Committee Chair: US EXIM Danilo Ćirković (AOFI) AXA XL
ZURICH 6 Berne Union 2018 INTRODUCTION
Elected Officials
President, Topi Vesteri Vice President, Mandisi Nkuhlu FINNVERA Finland | Deputy CEO, Group ECIC South Africa | Chief Operating Officer Chief Credit Officer Mandisi Nkuhlu holds the Topi Vesteri joined Finnvera position of Chief Operating in 1998 as Executive Vice Officer at the Export Credit President responsible for Insurance Corporation of running Finland’s officially South Africa SOC Limited supported export credit and (“ECIC”). guarantee system. Having ECIC is the official Export managed Finland’s state Credit Agency of South Africa and provides backed ECA business for almost 17 years, political and commercial risk insurance Topi assumed the position of Deputy CEO to facilitate export trade and investments and Group Chief Credit Officer responsible outside South Africa. for credit and analysis functions of both Mandisi has worked for various financial Export Credit Agency (ECA) as well as institutions involved in the financing of domestic SME financing business of Finnvera, infrastructure development. He spent five in October 2015. years at the Development Bank of Southern Topi is Chairman of the Board of Finnish Africa (“DBSA”) as the legal advisor to the Export Credit Ltd, the subsidiary of Finnvera Project Finance team responsible for cross- responsible for providing funded export border private sector projects. During his credit solutions as well as Finnvera’s venture stay at DBSA, he was seconded to Masons capital subsidiaries Veraventure Ltd and in London, a law firm specializing in Public Seed Fund Vera Ltd. Topi also served as Private Partnerships. Board Member of Finnfund (Finnish Fund for Later on, Mandisi worked for the Industrial Industrial Cooperation Ltd), Finland’s official Development Corporation of South Africa development finance agency and as a board Limited (“IDC”) in the International Finance member of Finnish Credit Insurance Ltd. Department dealing with export finance Before joining Finnvera, Topi had a 17- transactions. Prior to re-joining ECIC in year banking career in Postipankki, one of February 2011, he was a Director of Export Finland’s leading commercial banks. During Finance at Standard Bank of South Africa. this period he held various managerial Mandisi has worked on numerous positions in Helsinki, Tokyo and London infrastructure and mining projects. He cut covering debt capital markets, corporate his teeth in the Mozal I and Mozal II projects banking, leasing, international network and and worked on the Nelspruit Water PPP lending as well as general management Concession, the first bank financed water of the bank’s overseas and domestic PPP Concession in South Africa. subsidiaries and business units. Mandisi holds a B Iuris and the LLB degree Within the Berne Union, Topi was from the University of the Western Cape. appointed President in 2015, was Chairman He is an admitted attorney. He furthered of the Medium and Long Term (MLT) his studies at Wits Business School – Committee in 2009 – 2011 as well as Vice Management Advancement Programme, President of the Union in 2003 – 2004. Senior Executive Programme and at the UCT Topi holds a Master’s Degree in Law Graduate School of Business – Executive (LL.M.) from the University of Helsinki. Leadership Programme. 7 Berne Union 2018
Short Term Committee Medium / Long Term Committee ST Committee Chair, Verena Utzinger SERV Switzerland | Senior Relationship MLT Committee Chair, Manager Hendrik Holdefleiss Verena Utzinger has been EULER HERMES Germany | Head of Division working for Swiss Export Underwriting & Risk Management Risk Insurance ‘SERV’ since Dr. Hendrik Holdefleiss Spring 2000. Initially she studied economics at the joined the underwriting Universities of Regensburg, department, with Barcelona, Muenster and responsibility for key holds a PhD in international accounts, financial and various other economics of the University institutions in French-speaking Switzerland, of Kaiserslautern. He started as well as Ticino and a part of German- his career at Deutsche Bank AG and joined speaking Switzerland. Euler Hermes in 1999. In the State Export Verena is now responsible for relationships Credit Guarantee Division Hendrik Holdefleiss with financial institutions, new customers and headed the Economic Research Department bilateral chambers of commerce, as well as carrying out analysis of trade policy and coordinating collaboration with the private country risk. insurance market within the framework of He has been in charge of international reinsurance agreements. relations and cooperation in international Verena is a Member of the Board of institutions (EU, OECD) for several years. SABC Swiss African Business Council in Later he was in charge of Public Relations Switzerland. of the Export Credit Guarantees at Euler As the Head of the Swiss Delegation Hermes. Since 2011, as Head of Underwriting at the Berne Union, she represents SERV and Risk Management, he is responsible for at various Berne Union meetings and also the global business of the German ECA. appears regularly as a speaker at other external events MLT Committee Vice Chair, Pedro Pessoa Carriço ST Committee Vice Chair, Chunyi Xiao ABGF Brazil | Executive Manager - SINOSURE China | Deputy General Manager International Credit Assessment & of Export Trade Credit Underwriting International Relations Department Pedro Carriço is Executive Ms. Xiao Chunyi, Deputy GM Manager of Credit & Market of ST Export Trade Credit Analysis at the Brazilian Underwring Dept, in charge Guarantees Agency (ABGF), of large credit approval. She where he is responsible for has been working in Sinosure risk assessment of since its establishment in counterparties in export- 2001. related insurance as well as domestic guarantees. He has been with ABGF since 2014 when the Agency took on the role of export credit agency on behalf of the Brazilian Government. His experience within the Brazilian officially-supported export credit insurance scheme goes back to 2009 when he started working in the country risk department at SBCE. Prior to that, Pedro spent eight years in various positions at Banco Pactual, a Brazilian investment bank. He holds a Masters’ degree from the Johns Hopkins 8 University School of Advanced International Studies. Berne Union 2018
Investment Insurance Postgraduate Degree (“DEA”) in International INTRODUCTION Committee Prospective from the University of Paris V and a specialisation in International Trade from the “Ecole Européenne des Affaires”/ INV Committee Chair, EAP in Paris. Christina Westholm-Schroder She is fluent in French, Spanish and SOVEREIGN RISK INSURANCE Bermuda | English. She is a former Chairman of the Chief Underwriter & SVP Single Risk Committee of the International Christina is responsible for all Credit Insurance & Surety Association aspects of Sovereign’s (ICISA) 2014-2015 and an active participant transactional underwriting, in theBern Union. with particular focus on capital markets and financial institution business. Christina is also relationship manager Prague Club Committee for a number of Sovereign’s ECA and Multilateral Agency clients. Christina has PC Committee Chair, Danilo Ćirković worked in the political risk field for more than AOFI Serbia | Executive Board Member and 30 years. Prior to joining Sovereign, she was Executive Director for Insurance with the Multilateral Investment Guarantee Agency (MIGA) for 11 years. Danilo joined Serbian Export She joined MIGA as one of its first Credit Agency (AOFI) in employees in 1988 and worked in several January 2006, just a few capacities, including regional manager for months after it was founded. Asia and Latin America and most recently From the beginning Danilo as manager for syndications and business has been engaged in development. In this capacity, she was establishing and developing also responsible for the Agency’s re- and the credit insurance business of the coinsurance activities. company. During his career in AOFI Prior to MIGA, Christina worked as a (2006-present), Danilo has worked in risk political risk insurance broker in the Bank of and policy underwriting as well as America’s global trade finance department reinsurance. Since November 2013, Danilo in New York and as manager in the political has been appointed to the position of risk department at AB Max Matthiessen in Executive Board Member and Executive Stockholm, Sweden. Christina has an MBA Director for Insurance. in international business from Stockholm His previous work experience has been School of Economics and Business with the National Assembly of the Republic Administration and an MBA in finance from of Serbia, where Danilo worked as an Adviser New York University. (2005), and with the UN International Criminal Tribunal for the Former Yugoslavia at The Hague, Netherlands (2001-2004), INV Committee Vice Chair, Nuria Gorog where he worked as the case manager for ZURICH Switzerland | Senior VP – Head of defense in three court cases. Credit & Political Risk, Continental Europe An economist by university education, Danilo also holds a Masters degree in Nuria Gorog joined Zurich in Management from the Faculty for January 2007 as Senior Vice Finance, Economics and Administration in President and Regional Belgrade, Serbia. Manager for Continental Europe – Credit & Political Risk. Prior to joining Zurich, she served seven years as Chief Underwriting Manager in Continental Europe for Unistrat Coface (Coface Group). Previously, she was Business Development Manager -Credit & Political Risk- in the in house insurance broker of Natixis (Cauri). Ms. Gorog holds a Master’s Degree in Law 9 from the Universidad Autonóma of Madrid, a Berne Union 2018
PC Committee Vice Chair, Laszlo Varnai Yerdan Bekkhozhin Berne Union | Associate Director KAZAKHEXPORT Kazakhstan | Deputy Chief MLT Committee Support) Executive Officer Laszlo joined the Secretariat Yerdan Bekkhozhin joined in June 2015, to advise it on KazakhExport as a Deputy legal matters and to support Chairman of the Board in the Committees (primarily October 2014. He is the ST Committee) and responsible for underwriting, Specialist Meetings. Since risk management, legal April 2017, Laszlo has been aspects and international supporting the MLT Committee and the data relations. Before joining KazakhExport, development project. Yerdan spent more than 6 years in banking He gained focused experience in policy sector working for local and international analysis as he worked for EXIM Hungary banks in Kazakhstan and in JP Morgan Chase for more than 5 years, leading the ECA’s in Australia. international relations (OECD, EU and Berne He started his career as a consultant in Union) and ensuring compliance with WTO, the investment systems area. Yerdan holds OECD and EU regulations, as well as the a Bachelor of Banking and Finance and international sanctions. a Bachelor of Computing from Monash Laszlo graduated in law from Peter University Melbourne, Australia. Pazmany University, holds a DipHE in Law of England and Wales and the European Union from the University of Cambridge, and a diploma of economic diplomacy from the Berne Union Secretariat Károli Gáspár University in Hungary.
Vinco David Berne Union | Secretary General Paul Heaney Berne Union | Associate Director Vinco David was appointed (Communications, Media & Outreach) Berne Union Secretary General in March 2017. Prior Paul manages to this, he has served as a communications and Management Committee outreach at the Secretariat, Member and as the Chair of having joined in July 2016. the Investment Insurance His responsibilities include Committee. A Dutch national, he has over 30 coordinating production of years’ experience in various aspects of credit Berne Union publications, and investment insurance, including more development of digital engagement and data than 20 with leading international credit tools, and press and media liaison. Paul insurer Atradius, in diverse management works with the Outreach Task Force to roles. develop joint-initiatives and build influence Before joining the Berne Union as with the Berne Union’s external network of Secretary General, Vinco David served as industry partners. a Management Team Member of Atradius He has 8 years of experience working in Dutch State Business, the Export Credit communications, events and publications Agency of the Netherlands. Prior to this relating to the trade finance and export he has held positions at the Berne Union credit insurance industry. Prior to joining the Secretariat and the Netherlands Ministry BU, Paul worked as a Conference Producer of Finance. He holds an MA in political for Informa, one of the world’s largest events science and international relations and a and publications companies. BA in economics and Italian language and Paul holds a BA in Philosophy from literature from the Free Reformed University Trinity College Dublin and an MA (also in of Amsterdam. Philosophy) from King’s College London. .
10 Berne Union 2018
Nicole Cherry Olga Kompaniets INTRODUCTION Berne Union | Event Logistics & Berne Union | Associate Director Office Manger (Short Term Committee Support)
Nicole joined the Secretariat Olga brings over 7 years of in July 2016 and is experience gained in responsible for all meeting banking where she held a and office logistics. In this number of front office role she works closely with positions with overall Berne Union member hosts responsibility for building the and external suppliers, Trade & Structured coordinating preparation for General and Commodity Finance business within various Specialist Meetings across the world. client sectors, geographies and products. She also manages office operations, Her skills include relationship finance and accounts and is the first port of management, deal origination/ structuring/ call for all member support and assistance. implementation/ execution, credit analysis as Nicole has a degree from Roehampton well as substantial knowledge of Blockchain. University and has spent six years working Olga holds a Masters Degree in in Tanzania on various charity and non for- Management from Cass Business School profit projects as well as gaining corporate (London) and a BA in International Economic experience working as the assistant to the Relations from MGIMO University (Moscow). CEO of East Africa’s largest company.
Ian Gordon-Brown Eve Hall Berne Union | Data & Technology Manager Berne Union | Associate Director Ian qualified with a BSc (Prague Club Committee Support) (Chemistry and Applied Eve joined the Berne Union Mathematics) from the Secretariat team in October University of Cape Town in 2017 with primary 1991. He moved to London in responsibility for managing 1994 and has worked in the Prague Club Committee, finance IT in both London a dedicated forum for credit and New York in this time. insurance companies from More recently he completed 4 years new and emerging markets. of application development and support She has over fifteen years of experience in at Fidelity International and database corporate finance, business development and structuring and development at RPMI and investor relations. Eve held several positions Pantheon. at various GE media businesses in New York, In his spare time Ian is a keen skier, opera Hong Kong and London. Most recently, she goer and traveler. has focused on management consulting projects for both young and mature organisations. A Londoner of 20 years, she enjoys spending time with her family, travelling, learning Italian, practicing Bikram yoga and skiing. Eve holds an MBA in Finance from Bentley Graduate School of Business in Massachusetts, USA.
11
Berne Union 2018
Foreword from the INTRODUCTION Berne Union President
Topi Vesteri, Berne Union president, deputy CEO and group chief credit officer at FINNVERA, reflects on the transformations he has seen in his 20 years’ involvement with the Berne Union.
2018 was the hottest summer ever recorded deficit – where in Finland, hitting temperatures in excess foreign financiers of 30 degrees Celsius, even as far north as can ultimately stop Rovaniemi in the Arctic Circle. It was here that financing the deficit. I observed the remarkable sight of reindeer Without careful lapping at the shore, standing side by side policy management, with human bathers, and all seeking relief untenable borrowing from the extreme heat – more than 10 degrees costs and escalating higher than the average for the time of year. defaults may be the This caused me to reflect on the powerful, result. perhaps permanent, effects of climate change, Topi Vesteri The cycle of crises the counterbalancing, instinctive adaptation repeats again and again. It is debatable of an ecosystem, and how the observed whether they are avoidable, or rather an environment inevitably alters with time. inherent aspect of our financial system. But almost more important than the crisis The Cycle of Crises itself is the process of its resolution. The It is 10 years since the collapse of Lehman reactions from international borrowers and Brothers ushered in the global financial lenders; the policy moves to address the crisis (GFC), drying up credit, tightening systemic shortcomings and to avoid worst- regulation and hammering home the concept case fallout: These are the actions which of systemic vulnerability in the globalised shape the long-term outcomes. In the case financial system. of the GFC, it is these outcomes which have The economic impact of the crisis can delivered the largest impact to the financing barely be overstated and is still being felt of international trade. today. The sociological impact is no less concerning: It has eroded confidence in the Bank retrenchment and the foundations of the international financial transformation of ECAs system and contributed significantly to the Since the GFC, the number of banks involved wide-spread backlash of anti-globalism in trade and export finance has decreased which is now concentrated in shockwaves of significantly. The immediate effect was populist, nationalist and protectionist politics a massive shortage of bank liquidity and we see throughout the world. increased costs of borrowing. The withdrawal Of course, the GFC was not the first, nor of correspondent banking and financial lines indeed the last banking crisis we will endure. for banks and credit lines for borrowers Since the start of my finance career in 1982 produced a consequent bottleneck in the I have observed many such cycles. From financial life-blood of trade. Export Credit LatAm, to the Nordic crisis of the early 90s, Agencies (ECAs) have a mandate to support followed by the Asian and Russian crises at national exports and to fill financing gaps in the end of that decade, in all cases there was exactly these circumstances. Since the crisis, some unhealthy combination of undisciplined it is no exaggeration to say that the role lending and inadequate macro control in an and products of ECAs have become more environment of financial liberalisation. As important than ever before for the financing we are now experiencing in some markets of world trade. again, debt funded in foreign currency is The amount of new cover provided 13 very vulnerable to high current account annually for trade by ECA members of the Berne Union 2018
Berne Union has almost doubled in ten years, institutionally in the Berne Union. The from around half a trillion USD in 2007, to Chinese ECA, Sinosure, is relatively young by just a bit less than one trillion USD in 2017. ECA standards: founded in 2001 and a Berne Even with the return of liquidity to the Union Member since then, it has now grown market, banks are more reluctant than to become the largest and one of the most previously to take so much risk on their own most professional members, by any measure. balance sheets and even with the maximum At the start of my ECA career, our role cover percentage provided by an ECA, was predominantly to support transactions there is sometimes still difficulty sourcing in political risk countries, but over time financing for long term transactions. This has this has changed, and the biggest driver led to an increase in the number of funded is often now the need to fill market-gaps (as opposed to pure-cover) export credit arising from large transaction size and schemes. In 2009 the Finnish government tenor. Consequently, we are now seeing a mandated Finnvera to fund long-term maturation of exposure in OECD countries: financing of exports through its subsidiary Finnvera now has its biggest exposure in the Finnish Export Credit Ltd. At the time this USA and Germany, something which would was a temporary scheme, approved through have been unthinkable 20 years ago. parliament in an impressively quick process. While previously a large portion of ECA But, as we say, there is nothing so permanent business was based on sovereign guarantee, as a public temporary scheme, and FEC is the majority is now covering corporate to still going strong, ensuring long term buyer corporate trade, with no guarantee in place credit solutions for the clients of Finnish – African markets are a notable exception capital goods exporters. here. This trend has shifted the emphasis This development is not unique to Finland, from country risk to corporate buyer credit and many other countries and ECAs have risks and also demanded the development of deployed similar schemes – a reflection both a prudent approach to corporate credit risk of the economic conditions in which we are underwriting. operating and the impressive adaptability of many ECAs. Indeed, those ECAs who report Liberalisation of ECA Policy direct lending activity to the Berne Union, Over the years, there has been a forward- together provided almost 2.5 times as much moving trend amongst ECAs towards more finance between 2009 and 2012 (collectively) flexible structures, greater innovation and a than for the same period between 2005 and more market-driven philosophy. The policy- 2008. shift towards national interest rather than The situation for banks remains national content requirements reflects the challenging. Strengthened regulations have global value-chains which underpin so much brought with them onerous KYC compliance of international trade and allow ECAs to be and capital requirements which continue to more flexible in how they support exporters. squeeze their profitability. The recovery of At the same time, the growing importance banks’ appetite for trade business is probably of ECAs should not lead to a situation more or less complete now, but with these where guardian authorities apply pressure additional burdens it is unlikely to return to to take imprudent risks or provide support its pre-crisis state any time soon. in a way which is not sustainable in the long term. It is extremely important that The role of ECAs in trade is changing ECAs manage to maintain independence Changes in the global economy have in their risk management processes, even if refocused many elements of trade their philosophy is more policy-oriented. In facilitation, including ECA business. China general the industry has becomes extremely was once one of the biggest markets for professional in this regard, which is a many Western ECAs, but as the economic positive development, due in part to the profile of the country has changed so has encouragement and peer benchmarking of our business. Many ECAs now have much forums like the Berne Union. more limited exposure on China, while at the same time, Chinese companies investing Growth of the private insurance in China and abroad are now more likely to market make use of international sources of finance, Today, the private credit and political risk including partnering with ECAs and private insurance market has more similarities 14 insurers. These changes are also reflected than dissimilarities with the ECA world. Berne Union 2018
The growth in number of participants, costs of KYC make it progressively less INTRODUCTION risk appetite, capacity, and tenor from the attractive for banks to close deals with private market over the past ten years has smaller exporters and their clients. By been phenomenal. This is a really positive fostering a closer relationship with their development for the industry as a whole. smaller exporters and providing more of a It demonstrates well the solid foundations consulting role, ECAs help to educate the of our industry and the resilience and exporters and the borrowers and at the same profitability of the products, across cycles. time can transfer some of the KYC challenge Private market participation and from banks. reinsurance provides increased capacity This is one of the challenges we all hope for ECAs, making room for new business technology can help to tackle. However, for which may otherwise be unviable due the time being ECAs in particular need to be to concentration in certain industries or especially creative in their support for these countries, even with support from other clients. ECAs. I am proud to say that Finnvera, and other Nordic ECAs, have been some of the Promoting regulation and standards pioneers in making serious use of reinsurance For 40 years the OECD Arrangement has to increase capacity, both from the private been the de facto framework governing market and from other ECAs, spurred by the various national policies on export credit relatively small size of our countries. activities. It is notable for its longevity and At the same time, the growth of the comprehensive guidelines on all aspects of private market brings fresh expertise and export credit support. The Arrangement professionalism to our industry and there is continues to adjust to accommodate the lots that we can learn. In credit rating, for changing landscape of export support and example, ECAs are usually very adept at there are ongoing and active discussions understanding sovereign and bank risk, but the private market often has an edge on corporate risk, and here we can learn and Technology is the great benefit from their experience and tools. disruptor. All areas of
Technology is both a driver of finance and trade are now change and response to it responding to the new Technology is the great disruptor. All areas environment of instant of finance and trade are now responding to the new environment of instant global global communication. communication. It is a challenge, especially for the smallest (or largest) companies, to manage the level of investment this requires. which are providing fruitful input to the But at the same time, we are all constantly challenges arising. However, under the improving our processes, our data, our shifting gravity of world trade, and with efficiency and our flexibility. We are learning many emerging economies now becoming here from each other all the time, and this some of the largest exporters, the OECD will continue to be one of the biggest drivers consensus becomes less and less universal, of innovation for the foreseeable future. and consequently less and less relevant. The Arrangement is becoming less SMEs are of paramount importance relevant, simply due to the fact that the Small and medium sized enterprises are majority of financing is now happening essential to global supply chains and an outside of its remit. But that fact does indispensable component of world trade not detract from its importance nor and employment. They also offer the biggest its achievements. The objective of the growth prospect for banks and insurers in Arrangement has been to obtain a level terms of new clients. playing field, where exporters compete on However, the particular nature of export the quality and price of goods and not on transactions for small and medium sized the terms of financing offered. enterprises continues to be challenging This objective is shared by the for financiers and commercial providers of International Working Group on Export export support. Small ticket transactions, Credits (IWG), a multi-party collaborative combined with falling margins and increasing initiative created by China and the USA 15 Berne Union 2018
in 2012. The work of the IWG is extremely business and because of this ordinary people important in order to achieve a global level will eventually demand that politicians playing field, without which national trade take action on such issues. If, through our competition can easily escalate to trade industry we can be a tool to promote more wars. It is still early in the process for this environmentally friendly solutions, then we new initiative, and only time will tell how should. successful it will be, but certainly it will gain a lot from the groundwork already laid by the Berne Union promotes best practice, OECD over the previous 40 years. professionalism and even friendship It was almost 20 years ago that I attended The Berne Union creates a my first ever Berne Union meeting – The constructive professional forum for Spring General Meeting in London, in the whole industry April 1999. I remember being surprised at Institutions like the OECD and IWG are the length of the agenda – a full week of incredibly important to our industry. They meetings – and unsure what to expect. Any help to mediate competitive tendencies, initial apprehensions disappeared quickly promote constructive engagement and however, and I could happily say that even ensure sound principles are adhered to. In from that first meeting I had learned more a similar manner, the Berne Union, through than I ever expected – more indeed than at our Value Statement and Guiding Principles, any other such gathering. provides a positive benchmark for the In the years which have followed, I industry and an informal commitment from have never become any less in awe of the all members to adhere to a common set of great depth of knowledge, experience and prudent standards for the industry. creativity which is regularly shared at our Outside of the formal rules governing meetings, and I can honestly say that today, parameters of rating, pricing and taking risks, 20 years later, I am still learning from our all of these forums are useful in promoting exchanges. essential industry dialogue. This process The Berne Union is unusual for an industry allows us to constantly monitor and review association, in that despite the inherent the wider context of our activities. competitiveness of the industry, the Members The climate change I observed so starkly do not shy away from openly sharing their in Rovaniemi provides a good example: technical risk underwriting knowledge, best We may benefit from climate change on practice and new initiatives. This attitude is the shores of our 188 thousand lakes in the quite special, and it is something which helps summer, when warmer weather brings a to drive the industry forward, making us taste of Mediterranean relaxation even to more progressive, more adaptive and more to a northern country like Finland. But at resilient, together. the same time this causes severe damage All things change, of course, and over 20 which will impact all industries and the real years the Berne Union itself has adapted to economy as well as the sociocultural sphere. a changing environment. We are currently Our industry is becoming increasingly better organised and better equipped sophisticated and increasingly aware of than ever. A lot of hard work has gone into these factors. Indeed, already it is common building up resources and tools to keep practice to look into environment and human us connected, both to each other and to rights conditions as part of standard project the wider industry. We have an excellent assessment. Even if industry change is online portal, creating a virtual community sometimes slow moving, it does eventually for instant reference to information and happen that these considerations evolve. communication with other Members at any Generally, unsustainable factors of any sort time; we have held webinars which attracted in the long term can lead to increased credit hundreds of participants across the globe, risks, and there is now greater awareness of all connected and sharing an experience this. without the need to travel; our data is Ultimately, climate change will impact not becoming richer and more useful, both for just the underlying environment in which we Members and others. operate, but also the way in which we do Beyond any of this, however, the personal business. Connected to this is reputation risk. connections still matter the most. Since the GFC there has been an element of I have made lasting friendships and 16 suspicion and greater public scrutiny of big solid business connections with colleagues Berne Union 2018
from all corners of the earth, through my help to propel us more smoothly in tackling INTRODUCTION time in the Berne Union. Meeting in person, the challenges and initiatives which will come sharing stories, experiences, culture and next. good humour, even outside the conference We have greatly improved our rooms, builds trust, respect and personal communications and outreach activities. The connections in a way which cannot be Berne Union is becoming much better known replaced. And from these connections each than ever before in the financial world, of us comes away with a new resource, a and our engagement with other industry guide, a support or a partner, just a phone stakeholders – the ICC export finance banks, call away. for example – gives us a vital connection to I am incredibly happy to be part of the wider industry and an opportunity to this Berne Union family, and incredibly influence this in a meaningful way. proud of what we have achieved together, I am proud and happy to see so many over the last three years when I have had members actively contributing to the work of the privilege to serve as President. From the Berne Union and give all credit for these Shanghai to Warsaw, Lisbon, Copenhagen, achievements to our successful collaboration. The Berne Union is no less than the sum of all of the Members, and I wish to thank In the coming years I have everyone I have had the pleasure to meet no doubt that the Berne and work with over the past two decades. I must give special thanks however to a few Union will continue to groups and individuals: flourish, and I am excited To all of the Elected Officials I have to see the development worked with over the past three years as President: All of the Committee Chairs and of new initiatives and new Vice Chairs, who are too many to name here; ideas from those who will Secretary Generals Vinco David and Kai Preugschat, The Secretariat, an incredibly now pick up the mantle of able and energetic team who provide the leadership. glue which binds together the Union; The Chairs, and participants, of the new Task Forces, which have been instrumental in achieving the momentum I hoped for during Belgrade, Kilifi and now Paris, I think we have my Presidency: Maëlia Dufour, Jim Cruse built admirably upon the foundations our and Simon Foister. And of course, also my predecessors laid almost 85 years previously, two Vice Presidents, Mandisi Nkuhlu and in Berne, Switzerland. Michal Ron, with whom I have shared the I was given the fortunate honour of Presidential Platform and together conceived presiding over an exceptional three-year a vision for the Berne Union, as well as my term as President and it is fair to say that this predecessor Dan Riordan who initiated has provided a great opportunity to achieve many of the reforms completed during my real progress. I have approached this with Presidency. a spirit of momentum and completion, and In the coming years I have no doubt that the achievements I am most proud of, really the Berne Union will continue to flourish, and had their seeds almost since the start of my I am excited to see the development of new Berne Union career. initiatives and new ideas from those who will The unification of the Berne Union and now pick up the mantle of leadership. Prague Club increased our membership I hope that we will continue to look from around 50, to over 80 organisations. outward and to build our influence and But this is not a numerical achievement. The engagement within our own industry and additional depth of experience and culture, that of our partners, clients and other fresh perspectives and new energy have stakeholders. This is the way that we can made us a much richer group than before. effect real, lasting and positive change. But The revision of the Berne Union Statutes after all, I remember that it is people who was no less daunting a task, but has helped really make change, and in that spirit I hope to create a framework of better and fairer most of all that we will always keep our representation, increased transparency and close-knit community of family, friendship more effective decision making, which will and professional partnerships. 17 Bolder together
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Bpifrance, the French Investment INTRODUCTION Bank and Export Credit Agency for Entrepreneurs
By Nicolas Dufourcq, CEO, Bpifrance
With global ambitions and a bold strategy to improve the competitiveness of French business, Bpifrance looks forward to an exciting and promising 2019.
Bpifrance is a state-owned, privately run embrace globalization. bank, created in December 2012 by bringing Our mission is together Oseo, CDC Entreprises, the FSI and ‘serving the future’ FSI Regions. and we must stay at Since then, our 2,500 employees have the cutting edge of become essential partners for companies innovation and get and investors financing businesses, at every our many initiatives stage of their development, through loans, to come to fruition as guarantees or equity investments. We have we are key players in also developed a large range of extra- world trade growth. financial services (training, consultancy, Nicolas Dufourcq Today, Bpifrance networking) to help entrepreneurs meet their has the great pleasure to welcome all the challenges (innovation, export, digitization…). members of the Berne Union to France On the 1st of January 2017, the French and to organize, for the very first time, its government enlarged the power of Bpifrance General Assembly. More than three hundred by assigning it the role of the national members from all over the world have Export Credit Agency providing insurance come to Paris. As a proof of our faith in the to large companies, but especially for the benefits of globalization, Bruno Le Maire, the thousands of French small and medium sized French Minister of Economy and Finance, companies that need to go abroad, so much joins us for an introductory keynote. more ! Bringing together all the members of the Gathering their strength and expertise, the Berne Union, our global network of industry bank and ECA has become a successful ‘one- practitioners representing 84 members stop-shop’ : as a banker we provide solutions from 74 countries, in a single place is a for entrepreneurs to accomplish their dreams unique opportunity to express our combined in France and abroad too. As an ECA we ambition to improve international trade. make them feel secure about the payments Altogether we already support 13% of cross- related to their export contracts. We can border trade, we can be proud of that! offer a continuum of financing solutions for We need to continually adapt our entrepreneurs throughout their companies’ solutions to international rules and complete lifecycle that allow them to think production structures, to globalization, bigger, go further and go abroad. to digitization… Everything is constantly Last year, more than 80,000 businesses changing, but this is the name of the game of all sizes received more than € 24 billion in and we are all struggling to win it. investments, loans and guarantees, and € 20 Our global ambition is to understand billion of credit insurance has been delivered and serve our clients better, to stimulate to our exporters. the rejuvenation of the French economy, to Deeply rooted with its 48 branches across raise the productivity and competitiveness France, Bpifrance has a powerful ‘client- of French businesses, and boost our national oriented’ network that is strongly weaving its economy on the international market. way into every corner of the country to give Our future is exciting and promising, a hand to all entrepreneurs, from start-ups anticipating more growth in new business 19 to large companies, and encourage them to in 2019. Berne Union 2018 Berne Union 2018
2Data and Statistics Berne Union 2018
Berne Union: Totals Key ST – Short Term Trade Credit MLT – Medium/Long Term Export Credit INV – Investment Insurance Note: all figures in USD millions, unless otherwise stated.
New commitments each year by business line Total exposure at end of each period
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Recoveries during each year Recoveries during H1 year
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Public and private share of total exposure in Public and private share of exposure in DATA AND STATISTICS each reporting period 2018 H1, per business line
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Short-Term Export Credit Insurance
Public and private share of outstanding ST credit limits at period end exposure at period end
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ST recoveries each full year ST recoveries made in first half of year
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Top countries private Top countries ECA commitments 2018 H1 commitments 2018 H1
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hE/d ^dd ^ ,/E ϴй ϱй &ZE ,KE' /d>z E ydϱ E ydϱ ϱй ϭϮй ϭϳй Top countries ST private Top countries ST ECA claims paid 2018 H1 claims paid 2018 H1 ^͘^͘ĨƌŝĐĂ >Ăƚ hE/d ^dd ^ ϭϮй ŽŵŵŝƚŵĞŶƚƐ^ŚĂƌĞ ůĂŝŵƐ hE/d ϭϭй Ϯϴй Z ^dK&tKZ> /E/ ϱϬй ϱй ,/E ϭϱй h͘͘ E ydϱ ϱй ϭϱй ,/E E ydϱ ϰй ϭϯй hE/d ^dd ^ h͘͘ ϭϬй /d>z ϱй ϱй 25 Berne Union 2018 Medium/Long-Term Export Credit Insurance New MLT commitments during each year New MLT commitments during half year Ő ϭϴϬ͕ϬϬϬ ϴϬ͕ϬϬϬ ϰϱйzd ϱϭйzd ϭϲϬ͕ϬϬϬ ϰϱйzd ϳϬ͕ϬϬϬ ϭϰϬ͕ϬϬϬ ϲϬ͕ϬϬϬ ϰϮйzd ϭϮϬ͕ϬϬϬ ϱϬ͕ϬϬϬ ϭϬϬ͕ϬϬϬ ϰϬ͕ϬϬϬ ϴϬ͕ϬϬϬ ϯϬ͕ϬϬϬ ϲϬ͕ϬϬϬ ϮϬ͕ϬϬϬ ϰϬ͕ϬϬϬ ϮϬ͕ϬϬϬ ϭϬ͕ϬϬϬ Ϭ Ϭ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϰ,ϭ ϮϬϭϱ,ϭ ϮϬϭϲ,ϭ ϮϬϭϳ,ϭ ϮϬϭϴ,ϭ ^ŽǀĞƌĞŝŐŶ KƚŚĞƌWƵďůŝĐ ĂŶŬƐ ŽƌƉŽƌĂƚĞƐ WƌŽũĞĐƚƐ hŶƐƉĞĐŝĨŝĞĚ ^ŽǀĞƌĞŝŐŶ KƚŚĞƌWƵďůŝĐ ĂŶŬƐ ŽƌƉŽƌĂƚĞƐ WƌŽũĞĐƚƐ hŶƐƉĞĐŝĨŝĞĚ MLT exposure at period end Regional share of new MLT commitments in 2018 H1 OECD and other ECAs ϳϬϬ͕ϬϬϬ ϯϬй ϲϬϬ͕ϬϬϬ Ϯϱй ϱϬϬ͕ϬϬϬ ϮϬй ϰϬϬ͕ϬϬϬ ϭϱй ϯϬϬ͕ϬϬϬ ϭϬй ϮϬϬ͕ϬϬϬ ϱй ϭϬϬ͕ϬϬϬ Ϭ Ϭй ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϴ,ϭ ^͘Θ ͘ƐŝĂ D E ƵƌŽƉĞ E͘ŵĞƌŝĐĂ >Ăƚŵ ^͘^͘ĨƌŝĐĂ t͘Θ͘ƐŝĂ K KƚŚĞƌƐ /ŶƐƵƌĂŶĐĞ >ĞŶĚŝŶŐ New MLT commitments by region 2018 H1 Top countries new MLT commitments 2018 H1 LJŐ ^͘Θ ͘ƐŝĂ Ϯϱй ϭϱй hE/d ^dd ^ E͘ŵĞƌŝĐĂ ϮϬй ϭϬй ϭϬй t͘Θ͘ƐŝĂ D E ϭϱй E'> ^, ϱй ϳй ϭϬй YdZ ϱй ϳй Ϭй Z ^dK&tKZ> ϰϳй Ϭй ' ZDEz ϱй ^͘^͘ĨƌŝĐĂ ƵƌŽƉĞ 'zWd ϱй E ydϱ ϭϵй 26 >Ăƚŵ E͘ŵĞƌŝĐĂ Berne Union 2018 MLT claims paid each year MLT claims paid each half year DATA AND STATISTICS ϯ͕ϱϬϬ ϭ͕ϲϬϬ ϰϵйzd ϭ͕ϰϬϬ ϯ͕ϬϬϬ ϰϭйzd ϭ͕ϮϬϬ Ϯ͕ϱϬϬ ϰϳйzd ϭ͕ϬϬϬ Ϯϳйzd Ϯ͕ϬϬϬ ϴϬϬ ϭ͕ϱϬϬ ϲϬϬ ϭ͕ϬϬϬ ϰϬϬ ϱϬϬ ϮϬϬ Ϭ Ϭ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϰ,ϭ ϮϬϭϱ,ϭ ϮϬϭϲ,ϭ ϮϬϭϳ,ϭ ϮϬϭϴ,ϭ WŽůŝƚŝĐĂů ŽŵŵĞƌĐŝĂů EŽŶͲWĞƌĨŽƌŵŝŶŐ>ŽĂŶ WŽůŝƚŝĐĂů ŽŵŵĞƌĐŝĂů EŽŶͲWĞƌĨŽƌŵŝŶŐ>ŽĂŶ MLT recoveries each year MLT recoveries during half year ϲ͕ϬϬϬ Ϯ͕ϱϬϬ ϰϯйzd ϱ͕ϬϬϬ Ϯ͕ϬϬϬ ϰ͕ϬϬϬ ϭ͕ϱϬϬ ϱϲйzd ϯ͕ϬϬϬ ϰϵйzd ϰϱйzd ϭ͕ϬϬϬ Ϯ͕ϬϬϬ ϱϬϬ ϭ͕ϬϬϬ Ϭ Ϭ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϰ,ϭ ϮϬϭϱ,ϭ ϮϬϭϲ,ϭ ϮϬϭϳ,ϭ ϮϬϭϴ,ϭ WŽůŝƚŝĐĂů ŽŵŵĞƌĐŝĂů >ĞŶĚŝŶŐ WŽůŝƚŝĐĂů ŽŵŵĞƌĐŝĂů >ĞŶĚŝŶŐ Commercial and political MLT claims paid by region 2018 H1 Top countries MLT claims paid 2018 H1 ƵƌŽƉĞ ϴϬй ϳϬй ϲϬй t͘Θ͘ƐŝĂ ϱϬй E͘ŵĞƌŝĐĂ s E h > ϰϬй ϭϳй ϯϬй Z ^dK&tKZ> ϮϬй Ϯϴй ϭϬй Ϭй dhZ< z ϭϰй ^͘Θ ͘ƐŝĂ D E E ydϱ /E/ ϭϴй ϴй E ^͘^͘ĨƌŝĐĂ >Ăƚŵ Zh^^/ ϴй ϳй ŽŵŵĞƌĐŝĂů WŽůŝƚŝĐĂů 27 Berne Union 2018 Investment Insurance, Maximum limit of liability at each period Sovereign Obligations ϯϱϬ͕ϬϬϬ and Other Cross- ϯϬϬ͕ϬϬϬ Border Trade ϮϱϬ͕ϬϬϬ ϮϬϬ͕ϬϬϬ ϭϱϬ͕ϬϬϬ ϭϬϬ͕ϬϬϬ ϱϬ͕ϬϬϬ Ϭ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϴ,ϭ /ŶǀĞƐƚŵĞŶƚŝŶƐƵƌĂŶĐĞ KƚŚĞƌĐƌŽƐƐͲďŽƌĚĞƌŝŶƐƵƌĂŶĐĞ ^ƚĂƚĞŽďůŝŐĂƚŝŽŶŝŶƐƵƌĂŶĐĞ New cover provided each year New cover provided H1 each year ϭϮϬ͕ϬϬϬ ϲϬ͕ϬϬϬ ϭϬϬ͕ϬϬϬ ϱϬ͕ϬϬϬ ϴϬ͕ϬϬϬ ϰϬ͕ϬϬϬ ϲϬ͕ϬϬϬ ϯϬ͕ϬϬϬ ϰϬ͕ϬϬϬ ϮϬ͕ϬϬϬ ϮϬ͕ϬϬϬ ϭϬ͕ϬϬϬ Ϭ Ϭ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϰ,ϭ ϮϬϭϱ,ϭ ϮϬϭϲ,ϭ ϮϬϭϳ,ϭ ϮϬϭϴ,ϭ /ŶǀĞƐƚŵĞŶƚŝŶƐƵƌĂŶĐĞ KƚŚĞƌĐƌŽƐƐͲďŽƌĚĞƌŝŶƐƵƌĂŶĐĞ ^ƚĂƚĞŽďůŝŐĂƚŝŽŶŝŶƐƵƌĂŶĐĞ /ŶǀĞƐƚŵĞŶƚŝŶƐƵƌĂŶĐĞ KƚŚĞƌĐƌŽƐƐͲďŽƌĚĞƌŝŶƐƵƌĂŶĐĞ ^ƚĂƚĞŽďůŝŐĂƚŝŽŶŝŶƐƵƌĂŶĐĞ Claims paid during each full year Claims paid during each H1 year ϲϬϬ ϮϱϬ ϱϬϬ ϮϬϬ ϰϬϬ ϭϱϬ ϯϬϬ ϭϬϬ ϮϬϬ ϱϬ ϭϬϬ Ϭ Ϭ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϰ,ϭ ϮϬϭϱ,ϭ ϮϬϭϲ,ϭ ϮϬϭϳ,ϭ ϮϬϭϴ,ϭ 28 WŽůŝƚŝĐĂůsŝŽůĞŶĐĞ dƌĂŶƐĨĞƌ džƉƌŽƉƌŝĂƚŝŽŶ ƌĞĂĐŚŽĨŽŶƚƌĂĐƚ KƚŚĞƌ WŽůŝƚŝĐĂůsŝŽůĞŶĐĞ dƌĂŶƐĨĞƌ džƉƌŽƉƌŝĂƚŝŽŶ ƌĞĂĐŚŽĨŽŶƚƌĂĐƚ KƚŚĞƌ Berne Union 2018 Recoveries during each full year Recoveries during each H1 year DATA AND STATISTICS ϭϮϬ ϲϬ ϭϬϬ ϱϬ ϴϬ ϰϬ ϲϬ ϯϬ ϰϬ ϮϬ ϮϬ ϭϬ Ϭ Ϭ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϰ,ϭ ϮϬϭϱ,ϭ ϮϬϭϲ,ϭ ϮϬϭϳ,ϭ ϮϬϭϴ,ϭ WŽůŝƚŝĐĂůsŝŽůĞŶĐĞ dƌĂŶƐĨĞƌ džƉƌŽƉƌŝĂƚŝŽŶ ƌĞĂĐŚŽĨŽŶƚƌĂĐƚ KƚŚĞƌ WŽůŝƚŝĐĂůsŝŽůĞŶĐĞ dƌĂŶƐĨĞƌ džƉƌŽƉƌŝĂƚŝŽŶ ƌĞĂĐŚŽĨŽŶƚƌĂĐƚ KƚŚĞƌ Regional share of new investment insurance Regional share of new sovereign and other cross- cover provided in 2018 H1, by provider border trade covered in 2018 H1, by provider ϰϬй ϯϬй ϯϱй Ϯϱй ϯϬй ϮϬй Ϯϱй ϮϬй ϭϱй ϭϱй ϭϬй ϭϬй ϱй ϱй Ϭй Ϭй ^͘Θ ͘ƐŝĂ ƵƌŽƉĞ >Ăƚŵ D E ^͘^͘ĨƌŝĐĂ E͘ŵĞƌŝĐĂ t͘Θ͘ƐŝĂ ^͘Θ ͘ƐŝĂ ^͘^͘ĨƌŝĐĂ t͘Θ͘ƐŝĂ ƵƌŽƉĞ D E >Ăƚŵ E͘ŵĞƌŝĐĂ DƵůƚŝůĂƚĞƌĂů WƌŝǀĂƚĞ DƵůƚŝůĂƚĞƌĂů WƌŝǀĂƚĞ New investment insurance cover provided New sovereign and other cross-border trade by region 2018 H1 insured by region 2018 H1 ƵƌŽƉĞ ƵƌŽƉĞ ϯϱй Ϯϱй ϯϬй ϮϬй Ϯϱй t͘Θ͘ƐŝĂ E͘ŵĞƌŝĐĂ t͘Θ͘ƐŝĂ E͘ŵĞƌŝĐĂ ϮϬй ϭϱй ϭϱй ϭϬй ϭϬй ϱй ϱй Ϭй Ϭй ^͘Θ ͘ƐŝĂ D E ^͘Θ ͘ƐŝĂ D E ^͘^͘ĨƌŝĐĂ >Ăƚŵ ^͘^͘ĨƌŝĐĂ >Ăƚŵ 29 Berne Union 2018 Top countries new Top countries insured for new sovereign and investment cover 2018 H1 other cross-boarder trade 2018 H1 ,/E dhZ< z ϭϬй ϴй Z/:E s/ dED ϴй ϵй ,/E ϴй Z ^dK&tKZ> /EKE ^/ ϰϱй ϳй Z ^dK&tKZ> ϰϳй hE/d ^dd ^ Z/> ϳй ϱй ^ Z/ DKD/Yh E ydϱ ϱй ϱй ϭϵй E ydϱ ϭϳй Top countries investment insurance Top countries sovereign and other claims paid 2018 H1 cross-border claims paid 2018 H1 Z ^dK& tKZ> ϲй Z ^dK&tKZ> ϭϲй d,/>E ϭϱй KE'K ϰй ,/E ,Z/E ϰй ϰϬй d,/KW/ ϰϵй Z/:E ϴй h 30 Berne Union 2018 2018 H1 in review: business DATA AND STATISTICS is stable, but risks are high and unpredictable By Paul Heaney, associate director, Berne Union The landscape of international trade is currently stable, but fragile – precarious even – and subject to a rising number of threats. In a September press release, the WTO The effects are not downgraded its forecast for world trade so far visible in data growth to 3.9% for 2018, slowing to 3.7% in from Berne Union 2019.i This is lower than the 4.4% predicted in Members’ business, April, but still falls within the expected range and the direct impact set earlier in the year. Following the positive to the world economy upswing seen in the last couple of years, this is probably not so new deterioration is attributed to a ‘loss of severe as it might be, momentum’ in export orders, amid increasing in the short term at economic uncertainty. least. Despite this, Paul Heaney Added to the decline in overall growth, the situation is highly there is an increasing divergence in concerning for Members. performance across regions, encompassing Perhaps more troublesome than the both developed and developing economies, formal trade barriers, is the implicit shift with North America and emerging Asia away from multilateralism which they outperforming Europe and Japan.ii These represent. Even when negotiations ultimately imbalances give a hint of wider economic end amicably – as with the new USMCA uncertainty and the general sentiment trade deal – the repeated waves of high- from international economists appears to stakes gambling on trade relations imparts be of a shifting balance towards downside a hugely negative impact on business risks which could derail the current benign confidence and supply chain integrity. It is situation. this destabilisation of international norms Financial volatility arising from policy- which is most concerning for investors and normalisation in advanced economies and the uncertainty which this generates is likely imbalances in some emerging markets is an to have the biggest impact on world trade. important factor. Movements in commodity Despite this, Berne Union Members’ prices and their contribution to inflationary business has generally been performing well pressures on resource-dependent countries over the last period. will also play a role. But commentators are In 2018 H1, Berne Union Members: united in identifying the biggest threat to zissued aggregate credit limits up to USD the current status quo as coming from the 1.64 trillion in support of short term trade escalating tensions in international trade credit which we have seen playing out since the zinsured USD 88.8 billion of new medium / start of the year. long-term exports It is impossible to approach any discussion zprovided cover for USD 18.6 billion of new of current trends in global trade without foreign investments addressing the on-going trade war between Compared to data from the previous the US, China and other major trading reporting period, growth is more or less flat partners. This has seen the world’s biggest for trade-related business. Aggregate credit economies engaged in a tit-for-tat exchange limits outstanding at the half year mark are of actual or threatened import tariffs, just around 1% lower than at 2017 year end, but targeting everything from basic commodities how this will translate into insured turnover by 31 to high-tech goods and auto parts. the close of 2018 is difficult to predict. Berne Union 2018 New MLT commitments compare to USD Western Europe on the other hand, fell by 89.4 billion for the same period in 2017 – 60% relative to the previous period, and again, just a fraction of a percentage lower. account for only 6% of total in 2018 H1, Investment insurance is significantly relative to 28% of new business; a positive lower than the USD 38.9 billion reported indication of stability. The largest claims for 2017 H1. This difference – over USD 20 volumes were recorded for obligors located billion – while impossible to ignore, is not in Turkey and Venezuela, and in both cases primarily the result of a change in underlying relating predominantly to MLT business. business conditions, but rather the result of Recoveries continue to be strong, significantly revised reporting practice from especially in MLT business (85% of total) and one large member.iii USD 1.58 billion was collected by Members The share of total exposure remains evenly overall in the first half of the year. Argentina, distributed between public and private Iraq and Pakistan all saw notable volumes, members, with these claiming 51% and 49% again almost entirely for MLT transactions. respectively. Private members dominate short term business, issuing 72% of all new Short term trade credit insurance credit limits, while this is reversed in the case zRepayment terms < 12 months. Often 30, of MLT business, where public institutions 60, 90 days report 86% of all new business. Private zProtect against non-payment/protracted members cover 18% of total investments. default of buyer Short term trade accounts for around zCover credit risks and sometimes political 90% of total Berne Union business, by value. risks too Any analysis of the total portfolio therefore zIncludes whole turnover, multi-buyer and mostly reflects that business line. That single risk policies said, the highest volume of new business zTypically involves shipments of overall in 2018 came from: Western Europe commodities and consumer goods (28%), North America (11%), East Asia (10%), Southern Europe (9%), Eastern Europe (7%), Short term business has been quite stable South East Asia (6%) and South America in the first half of 2018. USD 1.64 billion of (5%). Despite claiming the overall highest aggregate credit limits were outstanding at share, all of the European markets saw the end of 2018 H1, just a little bit lower than lower new commitments than in the last at the end of H2, 2017. period (ranging from -3% to -7%), while the A number of reporting changes in the Americas and Asia saw comparable positive second half of 2017 resulted in a significant increases. boost to Berne Union Short Term figures. The biggest % growth of new business Firstly, the introduction of a more precise was in North Africa – up 18% from the definition of ‘new commitments’ in short previous period – and the biggest decline term business, provided a boost to year was in Central Africa – down 39%. end exposure, as some member adjusted their reporting to coincide with aggregate Overall claims trends credit limits, rather than utilisation. At the Members paid out claims of USD 2.65 billion same time one member began to report in total, with 47% attributable to short term data at group level – a positive addition to business and 53% coming from medium / our market coverage, but also providing a long-term transactions. This is just marginally distortion relative to previous years. lower than first the first half of 2017 and While these factors significantly alter the in line with previous years in terms of overall short term figures, they are of course distribution amongst the business lines. The not related to any trend in the underlying high claims period we entered in 2015 does business. For this reason, the graphs in the not appear to have ended yet, and judging statistics section of this publication given from previous form, we may record a fourth an indication of the expected ‘real change’ consecutive year of > USD 6 billion total through 2017 and 2017. We estimate that claims when final figures for 2018 H2 are around 5 of the 27% year on year increase in revealed. insured turnover recorded in 2017 was due to Naturally, the markets with biggest improvements in the business, and the rest exposure also tend to provide the most due to these reporting changes. Likewise, claims: North America, for example, 13 of the 66% increased commitments at 32 providing 11% of each in 2018 H1. Claims in year end are estimated to have a substantial Berne Union 2018 cause. These changes were elaborated upon DATA AND STATISTICS in greater detail in our Spring Data Summary, Change in share of turnover covered public and published in March.iv private 2016 The amount of real trade transactions supported is measured as turnover insured. This data is only reported by Members at year end, and as such we are unable to measure the total amount of new short term business at the half year mark. The credit limits outstanding give us an indication of the direction of travel, but without also knowing utilisation ratio and the length of the credit terms, the most we can say for now is that business appears to be comparable to 2017. Public and private short term business Both public and private members of the Berne Union provide short term trade credit insurance. The overall profile of business supported can be quite different in each total. However, this is low considering private case. Historically, the split between public members claim 60% of business in those and private share has been relatively even, markets. but more recently the private market has The top countries for claims in short term taken the lead. Over the past 3 years the business also reflect the differences already private members’ share of turnover has noted between the profile of public and increased from 53% to 60%. Credit limits private business: at 2018 H1 show 72% in favour of private Private members paid claims in the UK, members.v China, USA, Italy and the U.A.E, collectively accounting from 67% of their total. ECAs top New commitments by region 5 claims meanwhile were for the USA, Cuba, Overall, almost 50% of short term India, U.A.E and China, accounting for just commitments are for trade to buyers in 37% of the total. European countries. South and East Asia account for a further 20%, North America Medium / long-term export credits 12%, Latin America 7% and MENA a bit less provided by ECAs than 5.5%. Sub-Saharan Africa and West / zTenors > 12 months. Often 3, 5, 7 and up to Central Asia amount to less than 2% each. 10 years Private market commitments are highly zFor ECAs, must include some level of concentrated in Europe (60% of total). The national content or interest top 5 countries (Germany, USA, France, UK zProtects against commercial credit risks and Italy) account for 35% of total, and the and political risks top 10 over 50%. zPolicies often issued to banks and financial ECA business meanwhile is more widely institutions as credit enhancement disbursed, with top commitments (31%) for zTypically involves capital goods exports, South and East Asia. The USA is the top transport / energy / infrastructure obligor country with 14% of total business, zOECD sets minimum pricing for followed by China, Hong Kong, India and signatories to the ‘Arrangement’ Germany. Top 10 countries for ECA business amount to just over 40% of total. ECA members of the Berne Union’s MLT committee made USD 69.7 billion of new Claims data commitments in the first half of 2018. The Members paid claims of USD 1.24 billion in majority of this (60%) was in respect of total for short term policies in the first half of corporate obligors. This is an impressive leap 2018. 70% of this came from ECAs, who paid up from the 52% recorded in 2017 and set a higher claims than their private counterparts new peak for percentage of commitments in all regions, except for South and East to corporates, in continuation of a long Asia, where private members paid 56% of progressive trend over the past 10 years 33 Berne Union 2018 at least. Sovereign (23%) and other public for the first half of 2017 and are on course (10%) obligors make up the majority of the to exceed the average for the 5 year period, remainder. if similar results are achieved for the second 24% of new MLT commitments from half of the year. ECAs were to risks located in South and East Asia (Bangladesh, India, Indonesia and ECA reinsurance China). Just behind this at 23% the next ECAs reported a significant increase of 8% highest destination was MENA (Qatar. Egypt, in outward reinsured commitments, relative U.A.E, Kuwait and Iraq). Europe and North to the last reporting period at the end of America make up the second band at 18% 2017. This takes the reinsured portion of total and 14% respectively, while Latin America exposure up to 11%. At the same time, the and Sub-Saharan Africa attracted 8% of new total inward reinsurance commitments barely commitments each. increased at all. This means that some USD 50 billion of outward reinsurance (62% of the MLT claims and recoveries total reinsured amount) has been ceded to ECAs paid USD 1.24 billion in claims during private insurers, reinsurers and multilaterals. the first half of 2018. This is 10% lower than This data seems to confirm the trend over for the same period in 2017, but still on the past 5 – 10 years of increasing use of the high side in comparison to H1 results, private market capacity from ECAs. historically. Claims for the full year have been descending since a high peak in 2015 (seen Investment insurance, sovereign non- also in other areas of the business), so this honouring and private PRI relative decrease for the first half of the year zBU ’INV’ committee houses several is a positive indicator for a further decline in different business lines, including: 1. the year end results. traditional investment insurance (INVI), 2. Commercial triggers were the cause Private ‘PRI’ (INVO) and 3. sovereign non- of 72% of MLT claims and political risks payment (INVS) the remainder. This is lower than the 89% zPRI includes private market MLT recorded in the course of 2017, and could commercial non-payment risks indicate a resurgence of political risk factors zTraditional Investment Insurance offers for this business, but it would be sensible to some of the longest tenors – up to 20 see how results for the second half of the years, protecting against: political violence, year appear before drawing any conclusions. expropriation, contract frustration, In any case, we can note that political claims wrongful calling of bonds, business paid for 2018 H1 were at their highest than interruption and currency inconvertibility for any H1 period since 2014. MLT business was the source of several The maximum limit of liability for all three lines of the top countries noted for the overall reported to the Berne Union’s INV Committee portfolio, and referenced above – e.g. grew to USD 303.60 billion, around a 2% Venezuela and Turkey. The next highest increase on results at the end of 2017. 53% claims were paid in India, Canada, Russia, of the portfolio is for traditional investment Spain, Brazil, Chile, Singapore and th