In South Africa, we are seeing the opposite of what is being experienced elsewhere in EMEA. Europeans may be enjoying softness around rates and enhanced risk appetite but here in South Africa (specifically for domestic South African trade), we see a firm line being taken on pricing and reviews of risk and exposure by insurers.
Essentially, this is a good thing for all. Our insurers have to be very close to the risk, have excellent information and risk mitigation in place and as a result do an excellent job in facilitating trade. While this risk transfer, more often than not, costs a little more than we would like or takes a little longer to conclude, the reality is that despite everything going on through EMEA, our local carriers do it better than any of the insurers located outside of South Africa and you can trade here safely in the knowledge that they have undertaken their reviews of risk with due diligence and care.
The bright spots are the opportunities beyond the local borders, as investment in Sub Saharan Africa continues to gather pace, creating new markets, better governance and great opportunities for South African businesses benefitting from being positioned at the gateway to Africa, with technical know-how, logistical expertise, skills, products and people.
European Trade Credit insurance claims to rise in 2014
Trade credit insurance claims are expected to rise in Europe, the Middle East and Africa (EMEA) throughout the remainder of 2014, as more firms across the region experience cashflow restrictions as a result of over-stretching themselves as they seek to capitalise on economic growth.
According to Marsh’s latest EMEA Trade Credit Quarterly Briefing, several countries experienced increased claim levels in first quarter of this year, following a continuous decline in the last three quarters of 2013. Marsh expects this trend in claims to peak within the next 12-18 months.
Tim Smith, Managing Director in Marsh’s International Trade Credit Practice, commented: “Both economy conditions and business confidence are improving across the EMEA region. However, despite these positive indicators, past experiences tell us that some businesses will financially over-stretch themselves in the period following a recession as they look to grow.
“At the same time, insurers are providing higher levels of cover for less premium amid continuing competition for attractive risks. We expect the level of claims to rise across EMEA this year, which may lead to insurers seeking higher rates for trade credit insurance in 2015, and beyond.”
According to Marsh’s report, premium rates are still highly competitive in those geographies and sectors where insurers are vying for good-quality, well managed risks, with more than 50% of Marsh’s clients experiencing reductions in Q1 this year.
Among the other conclusions of Marsh’s EMEA Trade Credit Quarterly Briefing are:
· In Western Europe, while cover levels are increasing in the majority of countries; there are still some trade sectors where cover is more restrictive, including paper/pulp, construction and electronics.
· Insurers are adopting a more cautious approach to cover levels in Eastern Europe, due in part to political uncertainties and the insolvency outlook.
· Conversely, in Turkey and Dubai, high levels of capacity and local competition are leading to firms securing more competitive terms on renewal.
· Insurers are becoming more cautious in South Africa in the wake of increasing insolvencies.