Add image here from RFIB Image Library.ppt The Private Insurance Market for Credit and Political Risks Toby Heppel, RFIB Group Limited April 2012
Agenda • About the Private Credit/Political Risks Insurance Market • Coverage • Participants • The Private Market and Multilaterals • The Private Market and Africa www.rfib.com
The Private Market The Products 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. 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
About the Private Market Theoretical Capacity (per Transaction) since 2001 Investment Insurance Payment/Performance Payment/Performance Market Capacity (for Equity Investors Risks Risks Year by Year and (Private Sector (Sovereign Obligors) Project Financiers) Obligors) 1400 1200 1000 USD Millions 800 600 400 200 0 Sep Jan Jan Jan '01 Jan '02 Jan '03 Jan '04 Jul '05 Jan '06 Jul '07 '07 Jan '08 Jul '08 Jan Year on year growth, except for : '09 Jul '09 Jan '10 Jul '10 Jan '11 • Immediately after 9/11, and '11 '12 • Chubb’s withdrawal from the market in May 2010 www.rfib.com
About the Private Market Capacity – by Tenor – January 2012 Investment Insurance Payment/Performance Payment/Performance Market Capacity (for Equity Investors Risks Risks by Tenor and (Private Sector (Sovereign Obligors) Project Financiers) Obligors) 1,400,000,000 • Tenors vary from insurer to insurer. 1,200,000,000 • Capacity for 15 year 1,000,000,000 tenors is available from only a few insurers. 800,000,000 • The longer the tenor, the 600,000,000 fewer insurers can cover 400,000,000 it. • The graph shows 200,000,000 USD theoretical maximum 0 capacity per transaction. Up to 2-3 Up to 5-6 Up to 7 years Up to 10 years Up to 15 years years years www.rfib.com
The Private Market The “Arab Spring” experience • 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 www.rfib.com
The Private Market in sub-Saharan Africa • 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 www.rfib.com
The Private Market Working with multilaterals 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. 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. www.rfib.com 13
Thank You. www.rfib.com
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