Like the rest of the world, the international trade industry has witnessed considerable volatility in recent years. COVID-19, geopolitical strife and the Russia-Ukraine war have all posed different threats to the sector, requiring trade finance and credit insurance participants to innovate and adapt to help keep trade flowing.
The global volatility and disruptions of recent years have led to an increased focus on the trade credit insurance market. In order to adapt to these volatile times, the trade credit insurance industry, like many others, has slowly embraced digitisation.
However, this is a challenging transition, and there are numerous problems with sector-wide adoption. To learn more about how the trade credit industry is building further resilience, Trade Finance Global’s (TFG) Deepesh Patel spoke with Marc Meyer, SVP subject matter expert, Tinubu at ExCred International’s London conference.
Changes in the trade credit industry
COVID-19 was the largest systematic crisis for the global economy since the 2008 Global Financial Crisis (GFC). Though the world attempted to build a level of resiliency to financial-related downturns after the GFC, the pandemic represented a black swan event that threatened to undermine all of the progress.
The disruptions caused by COVID-19 made the credit insurance industry rethink their strategy, as the entire ecosystem and players have changed. Meyer said, “There was a pause for most of the [trade credit insurance] industry because the government entered the market, supporting the insurers, the customers, the policyholders and the corporates.”
New governmental backing for trade credit insurers allowed them to extend more insurance to companies, specifically SMEs. However, in 2023, there are still problems that concern the trade credit insurance industry. Meyer stated that expectations on insurance claims and risks are still incredibly volatile, the Russia-Ukraine war surpassed the one-year mark, and there is an ever-looming threat of a global recession.
The industry response? Meyer said the insurance industry realised they “had to be ready to face and to cope with a new crisis, so they invested [in digitisation].”
However, one of the biggest problems with this transition is that only a few banks were prepared for this transition. Private credit insurers and Export Credit Agencies (ECAs) are all currently in the process of adopting these changes and attempting to implement them into internal strategies.
During this time, Tinubu set out to help their clients navigate the troubled waters. Tinubu was actively maintaining and adapting their system to meet different needs and provided a service activity to better understand risk.
Meyer said, “We did that with urgency. We were able to help them upload some new limit decisions, we were able to help them fine-tune some of their products.”
Focusing on a more long-term view, Tinubu moved to help new entrants into the market. Meyer noted that trade credit insurance could be time-consuming and overwhelming for many people to handle, “Credit insurance, especially in the short term, is management on a daily basis. You have contact with the insurer every day for the limits, for the checks to be received, and for the claims. That’s very heavy management for the policyholder.”
Many companies, specifically SMEs, are unable to dedicate this amount of time and effort to credit insurance. This is how digitisation can help with the process, and where Tinubu is focusing their effort. Meyer said, “We work on this to support the design and implement the design of this new product in the system.”
Insurtech – working alone won’t work
In business, there is a fine line between partnerships and collaborations versus propping up a potential competitor. However, Tinubu prefers to play the role of a supporting company, as they believe no company can forge their own path in the face of new technologies and a volatile world.
Meyer said, “Partnership is needed because it’s a high technology, high investment, and like every technique, we will need a standardisation or a group of major stakeholders to push the project.”
Creating an interoperable digitised system is going to require collaboration from everyone in the sector. Worrying about assisting a potential competitor will only hinder growth for all parties involved. But it is easier said than done.
Meyer pointed out, “It is still DIY most of the time, and the industry realisation of this platform is a long road. Everybody will work on it, nobody will be able to do it on their own.”
The DIY environment behind digital interoperability is not going to be an issue that is fixed anytime soon, but the industry has to start somewhere. The key is educating enough actors to create a structure to move forward.
Trade credit insurance is an old, long-standing industry, and many of the mechanics behind the offerings have not changed. Meyer said, “What has changed is all the techniques and tools around the portals, the communication with the customer, with the broker and the automation of the processes.”
As more actors learn about the new processes and the new strategies, the industry will have to lobby for digital techniques to be taken seriously. Meyer said, “They will have to lobby and to educate. That’s going to be a very long process, but hopefully, the result is out there.”