The commentary discusses the elevated exposure to credit defaults for companies that have supplied goods on credit to Russian companies. As a result, trade credit insurers should expect to deal with an inflow of credit default claims by insured entities once their business counterparts in Russia and Ukraine start missing payments for the goods or services rendered to them on short-term credit.
The commentary highlights the following:
-- There is an elevated risk of credit defaults for exporters that have supplied goods on credit to Russian companies.
-- Similar to other insurance policies, trade credit insurance coverage usually comes with war exclusions, which will result in limited exposure for insurers that provide coverage for exports to Ukraine.
-- Businesses need trade credit insurance because the extension of trade credit exposes the provider to default risk. This is the risk of default on the debt as a result of the borrower failing to make required payments within the period allowed by the trade credit agreement.
-- The private trade credit insurance market is dominated by three insurance groups that collectively account for more than 85% of the global credit insurance market.
“War exclusions may limit trade credit insurers' loss exposures to business related to Ukraine but will likely not apply to business in Russia since the conflict is not within Russia's borders,” said Victor Adesanya, Vice President, Insurance. “Russian companies may fail to transfer funds to foreign suppliers as a result of economic sanctions imposed on them.”
Full commentary “Trade Credit Insurers Face Prospect of Elevated Russian Claims as War in Ukraine Persists.
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