The members of the International Credit Insurance & Surety Association (ICISA) reported an overall positive growth outlook for 2014.
“There are, however, concerns about the effects on payment behavior from economic volatility in emerging markets, a slowdown in China, the slow economic recovery in many European countries and the political uncertainty in parts of the world,” according to Jim Davidson, President of ICISA.
“Government debt in combination with the lack of government spending continues to be a concern as it hampers a strong structural recovery. Growth for the sector is expected in the NAFTA region, Latin America and Asia, and also in several EU countries,” he continues.
Trade credit insurance
In 2013 trade credit insurance members’ new business growth was negatively influenced by the ongoing economic and political conditions in parts of the world. “Nevertheless strong competition is noted, mainly in the EU and in the NAFTA region. The claims picture in 2013 differs per country with average claims size decreasing in Western Europe, NAFTA and Brazil, while the average claim size was larger in Asia, Northern Europe, Spain and Portugal.
Claims frequency increased in the Nordic region, Germany, Latin America and the NAFTA region. In other markets the number of claims was less intensive”, Andreas Tesch, Vice-President of ICISA explains.
The level of insolvencies in some key markets is high and claims are expected to rise as a result.
Tesch notes that “currently the trend in insolvencies shows an increase in most European countries, as well as in some Latin markets. Decreasing insolvencies are reported for some EU countries such as Austria, Denmark, Germany, Hungary, Ireland, Latvia, Romania and the UK, and for main markets in Asia, North America, South Africa and Russia.”
Tesch is positive about 2014. “The outlook for 2014 in general is positive supported by increased sales, in spite of a fragile recovery. Lack of government spending is seen as a concern for stable growth, particularly in the EU. Growth is expected primarily in Asia, NAFTA (mainly the US), Southern, Central and Eastern Europe, Latin America and Russia.”
“Members of ICISA have been able to steer businesses through recent and current economic problems by managing risks, preventing claims and maintaining cover,” concludes Davidson.
Growth was reported for Asia, Canada, US, Argentina, France and Italy. Davidson indicates that “the overall outlook for 2014 is confident for the EU and NAFTA with opportunities seen in product innovation and the development of new markets and the increased role in PPP projects in the US and Canada.”
In 2013 the surety market was characterized by some large claims, increased competition and a troubled construction sector. Davidson expects that the current state of the market will continue in 2014. “Markets in France, Ireland, Italy, Mexico, Portugal and the Netherlands are expected to harden. However the slow recovery in some EU countries and the decrease in public spending in combination with government debt are of concern.”
Growth is expected in Latin America, the US and Asia.
“Reinsurance members report increased competition due to ample capacity. Market conditions are soft and are expected to remain soft in 2014,” Tesch notes. “Product innovation and an increase in political risk cover are opportunities for the current year”. He is however also concerned about “the ongoing political unrest in several countries, the slow economic recovery in most EU countries, restrictive regulation as a reaction to the crisis enforced in some markets, as well as inadequate financing by banks.”