NEWSLETTER. Focus on innovation and flexibility. Autumn Meetings in Amsterdam. In this issue. Interview Louis Habib- Deloncle, page 3

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1 ICISA Newsletter, Volume 5, Issue 09! October, 2010 NEWSLETTER Autumn Meetings in Amsterdam Focus on innovation and flexibility High volatility is an opportunity for trade credit insurance, according to economist Sweder van Wijnbergen. This was one of the messages to take home from the ICISA Autumn Meetings 2010 on 23 and 24 September in Amsterdam, organized by ICISA. More than 80 delegates from all around the world attended the meetings to exchange knowledge and share views on next steps for the industry. Chair Rossella Pappalardo (Commercial Director at SACE BT SpA) welcomed a long list of new attendees in the Joint Committee Meeting, including delegates from as far away as Japan and South Africa. The key note speaker was economist Professor Dr. Sweder van Wijnbergen, teacher at the University of Amsterdam and Asia and Latin America expert. Looking at the world trade indices, he sees reason for optimism. Trade is a leading indicator for recovery. And it is clear that recovery comes from the emerging markets. Eastern Europe He emphasized that unemployment rates in Europe are lower than expected, although Eastern Europe (with sovereign debt and large currency mismatches in some countries) is still a problem area. Uncertainty will be with us for a long time, and there will be more uncertainty than you ve seen prior to 2008, Van Wijnbergen said. However, for trade credit insurance he believes high volatility is an opportunity. Do not act defensive, look at the future and stay flexible, was his advice. In this issue Interview Louis Habib- Deloncle, page 3 News and appointments, page Opinion: Simplifying our products, page 7 Calendar, page 9 Economist Professor Dr Sweder van Wijnbergen, chair Rosella Pappalardo and Rob Nijhout, executive director of ICISA. (photo: Cedric Lepelblad) Van Wijnbergen was previously Chief Economist at the World Bank in Washington, Professor at the London School of Economics and Secretary General of the Ministry of Economic Affairs in the Netherlands.! 1

2 Banking sector Alessandro Terzulli, senior Country Risk Analist at SACE SpA, gave an insight into the health of the banking system and on Basle III requirements. With regard to the stabilization of trade, Terzulli was more cautious than the professor. New export orders are losing momentum and unemployment stabilizes, but still on high levels, he said. A slow recovery of the economy and lower turnover are a base for trade credit insurance. Pappalardo: Alessandro underlined the fact that, although on the long term, the positive effect of a banking system restructuration will positively affect the economy. The market will critically compare our product with alternatives At the OECD we were the first representatives from the private sector to be invited to participate at their meeting, says Verhey. Basle III and Solvency II Martin van der Hoek (director Insurance Technique, Coface Nederland) was elected vicechairman of the Credit Insurance Committee and stood in for chair Rita Georgiou (Consultant Credit & Bond Division, Ethniki). The role of banks as assignee and insured was an important topic. The market will critically compare our product with alternatives, said Van der Hoek. Developments in banks and insurance companies related to Basle II en III and Solvency II will continue to play an important role in our next meeting. This will be the Spring Meetings in Brussels, on 9, 10 and 11 March Invited by Brussels In the ensuing Committee Meetings new and ongoing industry issues were discussed, such as product innovation and increasing the value of policies for banks and financiers in Trade Credit Insurance, industry data and product classification in the Single Risk Committee, PML and risk syndication for Surety, and the review of advocacy projects. Edward Verhey from ICISA gave an update on the two press conference calls and media coverage. A third call is scheduled for October 21st. He also emphasized a positive step forward with regard to interest from external parties. We are now invited by several international supervisory and regulatory organisations like DG Competition in Brussels to share our views on topics such as state support schemes. Alessandro Terzulli during his presentation -And now? What scenario after the crisis?- He is senior economist at SACE Spa in the Economic Research Department and published several reports and papers on economic, financial and internationalization topics.! 2

3 INTERVIEW Louis Habib-Deloncle: A major milestone for single risk The Single Risk* Committee celebrated its first anniversary during the ICISA Autumn Meetings 2010 with the election of its new chairman Louis Habib-Deloncle. He believes the main challenge for the industry is the creation of common definitions and language, in order to expand knowledge in political risk coverage and provide more visibility to our segment. The creation of the Single Risk Committee is a major milestone, says Louis Habib-Deloncle, CEO of Garant. The single risk market has existed more than 40 years. So far we have been considered as a market of last resort, though it grew steadily. Now it is time to structure us as a market. These are not only expectations from our clients, but also from reinsurers and from ourselves. In the past year we have been able to discuss common interests much better. We have come to the conclusion that it would make sense to conduct market survey to give this market segment a stronger identity. Clients will come back if they find a diversity of supply, just as in fashion streets Open Forum One of the highlights for him was an Open Forum in London in February 2010, where ICISA invited the Lloyd s Underwriters for an open discussion. All interested (also non-member) parties, including underwriters and reinsurers, discussed long term issues in the single risk market. Twenty underwriters in the same room exchanging views on the market, that never happened before, he says. Global actors Louis Habib-Deloncle has over 25 years of experience in international trade and insurance. He pioneered the private market for political risk insurance in continental Europe. Back in the 1980 s he thought of a single risk continental market next to London. Not as a matter of competition, but as a matter of diversity, he explains. Clients will come back if they find a diversity of supply, just as in fashion streets. I am happy to see several global actors delivering continental products now. They believe there is room for them to grow here in Europe. > *Single Risk is a single buyer and/or single transaction based business! 3

4 With its first crisis of large magnitude, the market has proven it responded well and won its credentials. There will be more demand, all the more since banks facing credit contractions are less present on the credit insurance market. In that respect Habib-Deloncle points out the positive edge of the challenged intervention of government schemes for trade credit insurance during the crisis in Europe. Government wouldn t intervene if it was of little importance in the global economy. It s a recognition of our activity and a call for the market to deliver better and more. Government wouldn t intervene if it was of little importance in the global economy Advocacy Figures show our good behavior during the crisis, says the chair. Claims were paid timely and with single risk, there is room for negotiation and recoveries where insurer and insured work closely together. The size of the risks call for syndication and tailor-made products. Another important purpose of the Single Risk Committee is to identify changes in the market environment and ramp up advocacy efforts towards financial international and national authorities. We want to address the specific issues posed by political and single risk activities. The issue of trade debt versus financial debt in rescheduling process is a good case, says Habib-Deloncle. Russian request One of his priorities as a chairman is the agreement on definitions in single risk. Global acting increases the need for a common language. For example, the Committee worked on a model of definitions upon request of a Russian insurer. Definition of our business bears heavy consequences for trade. It is important that definitions are not too restraining, says Habib-Deloncle. We need flexibility in order to evolve. Flexibility is also needed to meet clients expectations. Louis Habib-Deloncle founded and managed the P.A.R.I.S. underwriting pool and created Unistrat Assurances which he headed until April More recently, he promoted the creation of new insurance companies for international trade through Eurexim Holding. He is a Foreign Trade Advisor to the French government and an active member of Medef International.! 4

5 NEWS New member Aspen Re In September ICISA welcomed Aspen Re as our newest member. Winfried Knust, Underwriter Manager of the Credit, Bond and Political Risk Insurance team looks forward to fruitful discussions with other members and an exchange of more detailed views in Trade Credit Insurance development. This is especially important in a situation where markets seem to be on a turning point, said Knust after the Autumn Meetings he attended. Aspen Re provides reinsurance coverage to clients in various domestic and global markets through wholly-owned subsidiaries and offices in Bermuda, France, Germany, Singapore, Switzerland, the United Kingdom and the United States. An exchange of detailed views is especially important when markets seem to be on a turning point Istanbul Finance Summit ICISA was invited to participate in the Istanbul Finance Summit 2010, held from 28 to 30 September. The inaugural conference focused on capital markets, asset management, banking and trade finance with specific focus on regional issues and concerns. A panel discussion was dedicated to Trade Finance and Credit Insurance and the added security offered by Credit Insurance to banks and financiers. ICISA member Coface and ICISA s Executive Director Rob Nijhout formed part of this panel. Bankers agreed that cooperation between banks and trade credit insurers is a key element in securing recovery The presentation focused on the role played by trade credit insurance in facilitating trade and by offering added security to banks and financiers. The effects of the financial crisis on the sector s clients and how this is being addressed was further highlighted. Bankers at the meeting agreed that cooperation between banks and trade credit insurers is a key element in securing a recovery from the economic downturn, said Nijhout. The Istanbul Finance Summit is held annually for the benefit of traders, economists, financiers, insurers and academics with interests in the region.! 5

6 NEWS Steering a steady course to recovery Atradius released its latest Market Monitor with the title Steering a steady course to recovery. The September issue outlines, a- mong others, the latest insolvency trends in Austria, Italy and Sweden and the effects of the Russian ban on wheat exports. See: Global Award winner SCOR SCOR was awarded Best Global Reinsurance Company at the Global Awards 2010 ceremony in New York. Reactions magazine awards this title every year to the most successful global players in the insurance, reinsurance and brokerage industry. Denis Kessler, Chairman & Chief Executive Officer of SCOR, commented: This award constitutes an incentive to continue the Group s development, as set out in our new strategic plan for , "Strong Momentum" New SFR2 organization Munich Re Munich Re Financial Risks has a new organizational structure since October 1st. Our new set-up will increase our client centricity and underlines Munich Re s commitment to Credit, Bond and other financial lines, says Thomas Lallinger, head of this division since July 1st of this year. Standard & Poor s has raised the outlook on the A rating of SCOR SE and its main subsidiaries from stable to positive. APPOINTMENTS Atradius Trade credit insurer Atradius has announced the appointment of Alun Sweeney as the new commercial head of the UK and Ireland business. Swiss Re Swiss Re establishes a new leadership structure. Christian Mumenthaler, currently Head of the Life & Health Division, has been appointed Chief Marketing Officer Reinsurance and Member of the Executive Committee. Agostino Galvagni, currently Chief Operating Officer (COO) and Member of the Executive Committee, will become CEO Corporate Solutions. David Blumer, Chief Investment Officer and Member of the Executive Committee, will, in addition to his current role, assume responsibility for Admin Re. The Board of Directors has further appointed a new Chief Risk Officer (David Cole will succeed Raj Singh), a new Chief Operating Officer (Thomas Wellauer) as well as a Chairman Global Partnerships (Michel Liès).! 6

7 OPINION Jean-Pierre Knébel: Simplifying products is one of our biggest tasks The Autumn Meetings 2010 in Amsterdam were the last ICISA meetings Jean-Pierre Knébel, Manager and Head of Credit & Surety at AXA Winterthur, attended. In March 2011 he will officially retire. In this newsletter he shares his memories of early times in the industry and his expectations for Trade Credit Insurance in the future. ICISA used to be a platform where business and information about buyers risks were exchanged, he recalls. There were only one or two credit insurers in each country and there was little international competition. That all changed in the 90 s, the foundation of the big three started and reinsurers became more influential. That changed the role of ICISA, ICIA at that time, dramatically. It became a platform of competing companies. Different interests appeared, while on the technical level a common exchange of information on trade business is still very important. Risks you can manage Knébel is a strong believer in Trade Credit Insurance. When looking at the near future, he expects growth, although it won t become a huge industry. Buyer credits are the biggest credits on earth, bigger than bank credits. And we can protect the risk of those credits. However, suppliers who never had a loss, do not see the need for insurance. When you ask, in our Swiss market, companies which went bankrupt for the reason why, 78% of them answers: because the client didn t pay. In fact, this is one of the biggest risks they have. Too complicated In trade credit insurance and surety you ensure risks you can manage. It is not about hurricanes or accidents. The results are more or less in your hands. That is a different approach in insurance and makes our work interesting. However, potential clients shy away if it the insurance is too complicated. In that sense we have not been good enough as an industry to get the message across and to offer simple enough products. In trade credit insurance and surety you ensure risks you can manage. It is not about hurricanes or accidents No magic If the product is too complicated; what is needed? Design in policy, pricing and service is key to Knébel. An internet platform for online correspondence with the client will certainly help. We should assist companies who don t know how to deal with trade credit insurance through our networks. >! 7

8 When asked about the highlights of his career, he replies: There are more than 500 success stories. Each case in which we enable the client to do business better is a success story to me. If we do our work perfectly, there are no losses. The client has to find it sexy to avoid losses It s just that most of the time it doesn t seem spectacular. If we do our work perfectly, there are no losses. We avoid the loss. That is a different perception of security and hard to sell. One of the biggest tasks of the industry is to simplify products and make clients understand how trade credit insurance protects a massive part of their balance sheet. That is not easy, but it s also no magic. The client has to find it sexy to avoid losses with the help of the credit insurer. Before heading up the Credit and Surety unit of AXA Winterthur, Jean-Pierre Knébel spent 7 years as an Aviation Reinsurance Underwriter and 18 years as head of the Credit and Surety Reinsurance Division of Zurich Re, later Converium. NEWS New Committee Chairs At the ICISA Autumn Meetings, the Committees elected their chairs for the period September : The Surety Committee has elected Luc Reuter (Zurich Insurance PLC), succeeding Martyn Ward, as its chair. Lennart Ronnquist (Atradius) was elected vice-chair of the Committee. The Single Risk Committee elected Louis Habib-Deloncle (Garant) as its new chair and Jan Müller (Hannover Re) as the vice-chair. Rita Georgiou (Ethniki) was re-elected as the chair of the Credit Insurance Committee and Martin van der Hoek (Coface Nederland) as the vice-chair. The Committee of Underwriters re-elected chair Rossella Pappalardo (SACE BT) and elected Felipe Buhigas Tallón (Mapfre) as the vice-president.! 8

9 CALENDAR ICISA events: Accounting and Regulatory Committee Meeting, Brussels, 19 October Management Committee Meeting Amsterdam, 21 October Spring Meetings 2011 Brussels, 9-11 March th General and Associated Meetings 2011 UK, 8-11 June 2011 Other industry events: Baden-Baden Meeting October ALASECE Meeting Marbella,13-15 October IAIS 17 th Annual Conference Dubai, October Berne Union Annual General Meeting Cape town, 8-12 November AIDA s Lisbon Conference November UNCITRAL Workshop V, Vienna, 6-10 December ICISA Information The International Credit Insurance & Surety Association (ICISA) brings together the world s leading companies that provide credit insurance and/or surety bonds. Founded in 1928 as the first credit insurance association, the current members account for 95% of the world s credit insurance business. Today, with over USD 2 trillion in trade receivables insured and billions of dollars worth of construction, services and infrastructure guaranteed, ICISA members play a central role in facilitating trade and economic development on all five continents and practically every country in the world. ICISA Herengracht BS, Amsterdam the Netherlands +31 (0) Comments and contributions to this newsletter are welcome. For Media Relations and interviews please contact: edward.verhey@icisa.org For news and other suggestions please contact heidy.vanbeurden@icisa.org 3 rd AIDA Europe Conference, Amsterdam, May 2011 In the next newsletter (November): - An interview with Martyn Ward, departing chair of the Surety Committee - Opinion: Anticipate the next big thing says John Shimmins (SCOR Switzerland Ltd) - News from the Management Committee Meeting (21 October) in Amsterdam and more updates and interviews.! 9