Add image here from RFIB Image Library.ppt The Private Insurance - - PowerPoint PPT Presentation

Add image here from RFIB Image Library.ppt The Private Insurance Market for Credit and Political Risks Toby Heppel, RFIB Group Limited April 2012

www.rfib.com

Agenda

• About the Private Credit/Political Risks Insurance

Market

• Coverage
• Participants
• The Private Market and Multilaterals
• The Private Market and Africa

www.rfib.com

Most insurers underwrite the following risks:

• Political risks : Expropriation, Transfer, War & Political

Violence, Breach of Contract

• Sovereign obligor payment risk (“Contract

Frustration”/”Non-Honouring of a Sovereign Obligation”)

• Commercial credit risk (“Credit Insurance”) – mostly

as single transactions, rather than wholeturnover Insurance can be provided to the investor/exporter, or to a financial institution.

The Private Market The Products

www.rfib.com

About the Private Market The Players - Insurers

‘Corporates’

• About 10, including the “big three” :

Chartis, Sovereign and Zurich Lloyd’s

• About 25 insurers (“Syndicates”) at Lloyd’s

The Private Market is centred in London, though some insurers have branches elsewhere.

www.rfib.com

About the Private Market The Players - Brokers

• About 15 Broking Firms in the London Market

have a Credit and PRI insurance team

• These vary in size and in the range of business

types transacted

• Brokers source business from clients worldwide.
• Brokers syndicate business with insurers in

London and worldwide

www.rfib.com

About the Private Market Lloyd’s

Lloyd’s is not an insurer. Lloyd’s is a marketplace where insurers trade. All types of non-Life insurance are underwritten at Lloyd’s Annual gross written

• premium. £22 billion

Lloyd’s is rated S&P A+

www.rfib.com

About the Private Market Lloyd’s

Brokers negotiate with Lloyd’s underwriters face to face at the “box”. When they have found the best terms from an insurer, they will syndicate the risk amongst several insurers. A risk can be syndicated in a mixture of Lloyd’s and non- Lloyd’s insurers

www.rfib.com Year on year growth, except for :

• Immediately after 9/11, and
• Chubb’s withdrawal from the market in May 2010

About the Private Market

Theoretical Capacity (per Transaction) since 2001

Market Capacity Year by Year Investment Insurance (for Equity Investors and Project Financiers) Payment/Performance Risks (Sovereign Obligors) Payment/Performance Risks (Private Sector Obligors)

USD Millions

200 400 600 800 1000 1200 1400 Sep '01 Jan '02 Jan '03 Jan '04 Jan '05 Jan '06 Jan '07 Jul '07 Jan '08 Jul '08 Jan '09 Jul '09 Jan '10 Jul '10 Jan '11 Jul '11 Jan '12

www.rfib.com

• Tenors vary from insurer

to insurer.

• Capacity for 15 year

tenors is available from

• nly a few insurers.
• The longer the tenor, the

fewer insurers can cover it.

• The graph shows

theoretical maximum capacity per transaction.

About the Private Market Capacity – by Tenor – January 2012

USD

Market Capacity by Tenor Investment Insurance (for Equity Investors and Project Financiers) Payment/Performance Risks (Sovereign Obligors) Payment/Performance Risks (Private Sector Obligors)

200,000,000 400,000,000 600,000,000 800,000,000 1,000,000,000 1,200,000,000 1,400,000,000 Up to 2-3 years Up to 5-6 years Up to 7 years Up to 10 years Up to 15 years

www.rfib.com

• Fewer Credit/Political Risks claims than expected

(Risks either self-insured, or “no takers”)

• Tunisia – no claims
• Egypt – a few small political violence losses
• Yemen, Bahrain, Syria : few claims
• Libya : claims initially estimated at USD 500m+, now

revised to around USD 100m

• Current position :

Concerns in Egypt Mainly Offrisk in Yemen, Syria Some insurers open for Libya but highly selective Political Violence losses

The Private Market The “Arab Spring” experience

www.rfib.com

• Active in almost all African countries, although the

bulk of business is centred on just a few.

• Most insurance activity historically centred on Nigeria

(petroleum imports) and Angola (oil industry)

• Commodities related business : for example, Cote

d’Ivoire, Ghana

• Extractive industries : Zambia, DRC
• Some adverse experience : Ghana (Tema), DRC
• Current concerns : Nigeria

The Private Market in sub-Saharan Africa

www.rfib.com

Multilaterals syndicate risk with other institutions and insurers, in order to preserve and enhance capacity.

Private market insurers benefit from multilaterals :

• a source of business that they would not otherwise see
• local knowledge and information sources not easily

accessible elsewhere.

• risk assessment and diligence process
• The multilateral status and sovereign ownership, with

enhanced ability to mitigate potential losses, and resolve difficulties

The involvement of a Multilateral Agency – insurer or bank – frequently enables private sector insurers to accept business they would not otherwise consider.

The Private Market Working with multilaterals

www.rfib.com

RFIB Group Limited

• Lloyd’s broker - Established 1980
• Independent - 300 employees - majority owned by staff
• Group turnover £44m (2010)
• British business with global reach & network
• All main classes of insurance and reinsurance

Credit and Political Risks Practice

RFIB’s team of seasoned political risk insurance market practitioners acts as arranger and advisor to provide a comprehensive service that :

• is independent, unaligned and competitive
• is dedicated to sourcing innovative insurance solutions
• ensures prompt documentation and claims collection

Specialists in building co-operative relationships between Lenders, Multilaterals and Private Sector insurers.

13

www.rfib.com

Thank You.

www.rfib.com