European Banks Using Structured Credit
Insurance to Maintain Market Share of Asian Trade Finance Business:
Marsh Report
Amount of Insurance Limits Being Bought Increases by
425% in One Year
SINGAPORE, July 11, 2012 /PRNewswire-Asia/ -- European banks
operating are increasingly using structured credit insurance as a
way of simultaneously remaining active in Asian trade finance
market and deleveraging their trade finance portfolios. As the
Eurozone debt crisis combines with Basel III capital requirements
to increase pressure on balance sheets, banks are looking to
innovative ways to maintain market share in emerging markets,
according to a new report published today by Marsh.
According to Marsh's report, Eurozone Crisis Threatens Asian Trade
Finance Capacity, European banks have a significantly reduced
appetite for financing trade-related deals in emerging markets, but
are using structured trade credit insurance to remain active in
these markets.
Structured trade credit insurance covers the risk of non-payment
from a buyer for goods and services or a borrower for trade related
loans. It covers transactions with a credit risk exposure of
between one year to seven years, and many European jurisdictions
allow banks to count it as tier one regulatory capital under Basel
III rules that provide capital relief for banks.
"European banks face a choice in Asia: significantly reduce their
trade finance business or use structured trade credit insurance to
remain active in trade-related financing but with reduced levels of
exposure," said Richard Green, Asia Leader for Marsh's Political
Risk and Structured Trade Credit Practice. "Emerging markets are
heavily reliant on trade financing, especially at a time when
imports are critical and exports can generate much-needed foreign
exchange."
"In Asia, Marsh has placed around US$450 million in insurance
limits in the first half of 2012, compared with US$85 million for
the same period last year 每 a 425% increase. The majority of
transactions have been large commodity-based transactions and
shipments, such as the import or export of crude oil, liquefied
natural gas, palm oil and coal."
In addition, Marsh recently brokered a new $532 million trade
credit policy, underwritten by nine leading insurers, for the
International Finance Corporation (IFC), a member of the World Bank
Group. This enabled the IFC to expand capacity under its Global
Trade Finance Program (GTFP), which guarantees emerging market
trade transactions.
Our Marsh Risk Management Research briefing on the increased use of
structured trade credit insurance in Asia by European banks is
currently available to members of the media and Marsh clients only.
If you are a journalist and would like a copy, please contact
[email protected]( mailto:[email protected] ). If
you are a Marsh client, please contact your Marsh client
executive.
About Marsh
Marsh( http://usa.marsh.com ), a global leader in
insurance broking and risk management, teams with its clients to
define, design, and deliver innovative industry-specific solutions
that help them protect their future and thrive. It has
approximately 26,000 colleagues who collaborate to provide advice
and transactional capabilities to clients in over 100 countries.
Marsh is a wholly owned subsidiary of Marsh & McLennan
Companies( http://www.mmc.com ) (NYSE: MMC), a global team
of professional services companies offering clients advice and
solutions in the areas of risk, strategy and human capital. With
53,000 employees worldwide and annual revenue exceeding $11
billion, Marsh & McLennan Companies is also the parent company
of Guy Carpenter( http://www.guycarp.com ), a global leader in
providing risk and reinsurance intermediary services;
Mercer( http://www.mercer.com/home ), a global leader
in human resource consulting and related services; and Oliver
Wyman( http://www.oliverwyman.com/index.html ), a
global leader in management consulting. Follow Marsh on Twitter
@Marsh_Inc( http://twitter.com/@Marsh_Inc ).
SOURCE: Marsh