International Trade

New Arena For The Project Business

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...country exposures than in the past.

But it is in insurance that change has been greatest. Today, there are many more names in the private insurance market, with groups such as Chubb, Sovereign, Ace and Zurich Emerging Markets now well established. And the private underwriters have extended the exposure periods they can accept to five or even, in some cases, 10 years.

Moreover, they are also posing a serious competitive threat to the ECAs as underwriters of the more difficult risks. Some of the official agencies, seeking to balance their books, have become strikingly cautious – and most have reduced their own ability to be flexible by signing up to a common OECD Consensus system for categorising country risks.

Intended to guard against unfair subsidised competition, this has had the incidental effect of blunting agencies’ ability to compete because the country risk grid has taken a strikingly unsubtle and simplistic approach to the grading of more difficult markets. Many countries that are poor but financially stable and well-governed have been placed in the same maximum risk grouping as those that are completely failed states with no credible economic or political structure at all.

In particular, through this simplistic approach, the ECAs have disastrously hamstrung their own ability to cover deals in Africa, just at a time when the private market insurers, forfaiting banks and development financiers are becoming much more positive about the continent.

However, some ECAs have managed to adapt to the shift in the balance of the insurance market, away from official export credit and towards more flexible private market approaches. Coface, for example, continues to act as the official French state ECA under an agreement with the government. But it is, in fact, a private sector company and also provides cover on a purely commercial basis; it... continued on page four >

 

 

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