In times of macroeconomic and geopolitical uncertainty, such as the current market environment, private companies often hesitate to engage in international trade. This fear is understandable but only exacerbates economic slowdowns and volatility. This is where public-private support from Export Credit Agencies (ECAs), supported by global organisations like the Berne Union step in and support international trade.
Credit insurance is an invaluable part of the international trade ecosystem, and multiple players exist in this arena. At ExCred International, Trade Finance Global’s (TFG) Deepesh Patel sat down with Maëlia Dufour, director international relations, business development, rating, environment and climate at Bpifrance and president of the Berne Union, to learn more about the intricacies of the trade credit industry.
ECAs and private credit insurers: same, but different?
From the outside, ECAs and private credit insurers appear to perform the same duties. But after a closer inspection, there are some important differences between the two.
Dufour said, “The main difference is that export credit agencies have to respect the principle of subsidiarity. So they let private insurers insure first and, if they cannot, the exporters then come to the ECA.”
This distinction is vital for the insurance market. In terms of trade credit, private actors are almost always the first choice when possible, but when market conditions are unfavourable or a company lacks knowledge of the local market, ECAs play an important role.
SMEs are particularly vulnerable to economic volatility. When the economy goes through a crisis, smaller companies often see their lines of credit or insurance decrease. Dufour added, “In times of crisis, if the private insurers step out, then we [ECAs] can step in by reinsuring private insurers in order for them to be able to insure the SMEs and banks.”
Though there is this distinction between public and private insurers, Dufour notes that they work towards the same cause, which is developing export businesses and fulfilling market needs.
In recent years, the market for both private and public trade credit insurance has grown substantially. In the face of COVID-19, the Russia-Ukraine war, and rising inflation, world trade has become riskier than ever. But Dufour pointed out that world trade has recently increased by around 10%.
The combination of increased risk and increased trading means trade credit insurance is more needed than ever.
Berne Union: a common meeting ground for all
The Berne Union is a unique and powerful international organisation. It has 87 members from over 67 countries, representing ECAs, private insurers, and multilateral institutions. The diversity of the union is the strong point. Industry experts from across the world can communicate and share advice.
This association is vital to the success of the trade industry. As the world gets more complex and interconnected, no individual or company can navigate it alone.
According to Dufour, all members of the Berne Union share strategies and work towards a common goal. “We all have the same objective, to provide credit insurance to our exporters and large companies, as well as SMEs.”
The plan to get to net zero carbon
One of the most important and complicated strategies discussed between Berne Union members is sustainability. Berne Union members are committed to a net-zero target and spend much of their time discussing how to properly implement these standards.
While discussing her other role with Bpifrance, Dufour said, “We have put in place decarbonisation of our portfolio… As you know, we don’t insure any more coal, oil, or gas. And we have created financial incentives for the green projects.”
As president of the Berne Union, Dufour plans to encourage members to step forward and take concrete actions to reach the net-zero goal.
Dufour said, “Climate is one of my objectives [as president of the Berne Union]. We discuss a lot about what the ECAs, or private insurers, or multilaterals are doing regarding climate change, and this includes developing financial incentives, decarbonising portfolios, and how to reach the net-zero targets.”
Even though there has been lots of progress, both internally in Bpifrance, and within the Berne Union, there is a lot of work to be done.
Dufour said, “As you know, it will be a long marathon and we have to keep being in the race and reach the finish line.”
The fight against climate change is a collective movement, one that will not be won in the near future, but action needs to be taken now. Bpifrance and the Berne Union understand this urgency and are constantly finding new ways to collaborate and take tangible steps towards a more sustainable future.