1. and Risk Assessment G. CHRISSANTAKIS Madrid – March 10th 2016
Credit Insurance
and Risk Assessment
G. CHRISSANTAKIS
Madrid – March 10th 2016

2. Content of the presentation
Insurance is part of a global Risk Strategy
Credit Insurance Environment and Market Players
Credit Insurances as Business Enablers
Coverage
Macro-economic factors
Exposure Monitoring
Claims & Recoveries
Source of information
Open discussion

3. Counterparty Risk Strategy
Know Your Customers (KYC)
Know Your Exposure (KYE)
Assess your Corporate Collection competence
Balance between
Costs of Risk (Bad debt provisions, write-offs, etc…)
Missed Business Opportunity
% Revenue dedicated to risk coverage
KYC involves or a direct contact with the operators or a close collaboration with the Sales organization to get the needed info
KYE involves a close monitoring of the exposure with an efficient alarm management and forecasts
Credit is one of the orientation indicator for the Collection activity
Always in mind “The right Counterparty Risk strategy maintains a right balance between business opportunities and cost of risks”, including insurance premiums

4. A Sample of methodology
Fictive example of methodology and data mining
Per Country ?
Per Group ?
Per Product ?
Etc…
Sample of Ageing
Overdue
(Self ?)
Curative %
Bad Debts
Write Offs
0 to 5K€ 5%
75%
20%
15%
5K€ to 20K€
10%
85% 8%
20K€ to 100K€
100K€ to 500K€
35%
90% 2%
500K€ to 1M€
95% 0%
Over 1 M€
Total
100%
Per Country ?
Per Zone/Continent ?
Per Group ?
Per Product ?
Etc…
Any strategy definition needs a beforehand analysis of past Credit & Collection experiences.
The Data Collection and Data Mining is crucial to allow a valid identification of (no-)risks areas.
The result will orient the negotiation with insurances to both cover correctly the high risks and mitigate the costs on no-risk areas.
The deepest goes the data mining, the more dynamic will be the negotiation.
To note that insurances take the analysis of their customers to produce their quote.
Identify the areas of RISKS and NO-RISKS
 Define a Credit and Bad Debt Policy

5. Market Players (Worldwide 2014 figures – Total premiums perceived)
This chart refers to the market of the Trade & Export Credit Insurances
Key market players provide theoretically a WW coverage
However, some prefer the so-called Zone 1 (old economies like Euler) or Zone 2 (emergent economies like CrediMundi)
Source:
Experts in Credit Management
Specialized in Credit Management

6. Which coverage ? Economical risks (TB Negotiated)
Political Risks (FX freeze, Nationalization, etc…)
Stop Loss, Mezzanine, special BUs, Total Revenue
Type of thresholds (if any – TB Negotiated)
Unnamed risks
Unsecured risks (no deposit, no guarantees, no LOI)
Single coverages accepted or not
Group coverages
Syndicated coverage
Prior notice change/cancellation of coverage

7. Macro-Economic Factors
Countries partially covered
Countries excluded
Countries conditionally covered
Some examples
Embargo’s
(Civil) War Area
Currency usage
Prior notice to change coverage
MEF to take into account varies from insurance to insurance but generally all insurances do share the same opinion on a particular country risk
Examples and comments about country coverage with CrediMundi:
Partially covered : Russia, Egypt, Angola, Ecuador
Not covered: Afghanistan, Sudan, South Sudan, Syria, Iran
Conditionally: Iran, Libya, Cuba

8. Monitoring. A question of organization
Periodic Portfolio Reviews (TB Negotiated)
Disclose regular ageing balances
Credit Ratings (each one his own rating)
Global view of insurer
Claims history
Global view of coverages & overdue (see above reviews)
Ratings & Credit Limits
Financials & non-financials elements
Some examples
Prior notice to reduce/remove a coverage
Good to arrange regular portfolio reviews with insurer
Insurer select the case they want to review based on the ageing balances disclosed regularly (monthly, quarterly, etc…)
Explanations on the added value of a credit insurance

9. Claims & Recoveries Standard: claim = end of commercial relation
Recovery actions for any claims (insured or not)
Fronting by insured or insurer (TB Negotiated)
Can happen during/after a portfolio review
Time frame between claim and indemnity (TB Negotiated)
Insured can decide to temporary suspend or to stop the recovery process (TB Negotiated)
Recovery actions in parallel
An example
Normally, the introduction of a claim means the end of the commercial relation (no more billing)
The insurer can take care of recovery actions on your behalf even if the debt was not insured; in case of a claim higher than the coverage, recoveries are shared
Insured decides if he keep the lead of the process to recover the debt
At the occasion of portfolio review, the insurance can consider that the payment retention is no more acceptable and ask to introduce a claim (or to cancel the coverage)
Recovery strategy defined with the insurance (who’s doing what when and how…); playing in the movie “The Good, the Bad and the Ugly”

10. Insurances as sources of information
Credit Underwriting
Open discussion with the Credit Analyst of the insurance
All decisions can (must ?) be challenged
Group Monitoring
Example
Country Monitoring
Change of Credit Ratings
Example for Credit Underwriting: request FS or explanations on trends/events directly to the customer; challenge the decision based i.e. on own payment experience, etc…; (cases disclosed verbally only)
Example of Group Monitoring: interaction with insurer about 2 case study (group names disclosed verbally only)
Example of Country Monitoring: explain the Venezuela case + Cuba or Iran
Example of Change of Credit Ratings: (specific cases whose name will be disclosed verbally only)

11. This is it. Thanks for your attention
This is it ! Thanks for your attention ! Let’s start the open discussion with a short introduction on costs and premiums…

12. THANK YOU
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