Writing for the Berne Union’s 2016 Yearbook, Charles Berry, Chairman of BPL Global, discusses the increasing competition between government export credit agencies (ECAs) and the specialist credit and political risk insurance (CPRI) market. In the article, Berry suggests that such competition is inevitable and appropriate given that both now often cover the same type of risks, and should be welcomed as it offers choice for exporters and financiers.
Berry writes that such competition must be fair, however, requiring ECAs to comply with the OECD Arrangement with its minimum premium rates, and a level playing field on premium taxes. There is also the issue of ECA beginning to compete with their clients. Indeed, when an ECA approaches the CPRI market for facultative reinsurance, simultaneously as its client approaches the same insurers for cover on the same transaction, the ECA and client find themselves in competition for the same private market capacity. This brings the need for safeguards to ensure that when pursuing reinsurance, ECAs do not restrict client choice.
Berry concludes that, by abiding by the OECD Arrangement and following sensible policies, the ECAs can provide a haven of consistency, stability and capacity around which the CPRI market can ebb and flow, guided by a normal market process of client choice.
Read the full article here