Importers struggle with trade credit insurance

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Russian insurers are faced with the fact that they cannot insure the receivables (trade credits) of importers in the usual volumes – due to sanctions and the departure of international players, domestic companies have lost the opportunity to reinsure their risks. The problem is compounded by the lack of Russian reinsurance capacity, and the Bank of Russia has not given the Russian National Reinsurance Company (RNRC) the authority to accept these risks as reinsurance. Several insurers and business representatives told Vedomosti about the existing problem.

Insurance is the protection of the “seller” (enterprise or company) from the risks of not receiving payment for their goods from the counterparty, explains a representative of the All-Russian Union of Insurers. Most often, when importing goods into Russia, such insurance is required by banks that lend to suppliers – the wholesale buyer pays for the imported goods in installments, so the seller company wants to save itself from the risks of non-payment for deliveries.

Suppliers insured our debts to them, which made it possible to grant us a deferment, says Alexander Lipilin, executive director of Fort wine trading company. Now almost all insurance limits for Russia are closed and now we have an advance payment instead of a delay, he admits. The cost price grows by the cost of a loan in Russia and a cash gap appears that needs to be closed, Lipilin continues. “We manage, but for the market this is another reason for the increase in the cost of wine on the shelf,” he concludes.

The lack of necessary insurance coverage leads to the fact that large suppliers reduce shipments with deferred payment and limits on counterparties, and this is often small and medium-sized businesses, says Sergei Pechnikov, director of corporate underwriting at Soglasiya. According to Soglasiya estimates, in 2021 the volume of those insured against these risks in the economy reached 3.5 trillion rubles. We can assume, notes Pechnikov, that this is equal to the scale of the business, which can “shrink” in the absence of insurance coverage.

Russian insurers themselves prefer not to keep the entire amount under such agreements on their own retention (only about 10%) and transfer a significant part of the risks to the reinsurance company – most often these are the “subsidiaries” of foreign companies or the foreign company itself. At the end of 2021, 72% of all reinsurance protection, or 116 billion rubles, was placed by Russian insurers on the international market, follows from the data of the Central Bank.

But because of the special operation, the largest foreign insurers (Munich Re, Zurich, Swiss Re, Allianz) and insurance brokers (Marsh, Aon, Willis Towers Watson) announced that they were curtailing their business in Russia and leaving the market, which made reinsurance of risks impossible. In response, the Russian authorities imposed a ban on reinsurance of domestic risks from companies from unfriendly countries. The main five leading countries, to which reinsurance premiums go from Russia, now consist entirely of unfriendly countries: Great Britain, Germany, Switzerland, France and the USA.

” Consent ” is one of the five major insurers of commercial loans and for the company the problem of a shortage of reinsurance capacities is quite acute, admits Pechnikov. When trying to reorient to the markets of friendly countries in Asia, Soglasie faced the unwillingness of partners to take risks due to insufficient capacities, the insurer says.

Separately, the Central Bank does not disclose receivables insurance, but according to a higher-level aggregation in the Voluntary insurance of business risks segment, 22.3 billion rubles were collected in 2021, says Yevgeny Sharapov, director of ratings for insurance companies at the NKR agency. Of these, 69.5% (15.5 billion rubles) was given to reinsurance, foreign insurers account for about 35% of the total insurance premium, he continues. The share of foreign reinsurers in the risk of large contracts among Russian companies reached 90%, Pechnikov notes.

There was practically no internal insurance capacity, agrees Katerina Yakunina, chairman of the board of the Association of Professional Insurance Brokers. Most of the reinsurance falls on foreign counterparties, including because a significant part of the Russian receivables insurance market is represented by subsidiaries of large foreign insurance companies specializing in this type of insurance, or “subsidiaries” of foreign export agencies, explains the director of insurance ratings of the agency ” Expert RA” Ekaterina Serova.

What’s up with the decision

When international insurers, one after another, began to report their withdrawal from the Russian market, the Central Bank and the authorities took a number of measures. A law was promptly adopted to increase the size of the mandatory transfer of insurers’ risks to RNRC reinsurance from 10 to 50%. And the Bank of Russia, as the sole shareholder of RNPK, increased its capital from 71 billion to 300 billion rubles. But RNPK does not accept trade credits for reinsurance, says Yakunina. The main market participants are now in dialogue with the regulator and RNPK and are trying to find the best solution to the problem in order to provide insurers with an acceptable level of protection, says Pechnikov.

The market needs a prompt launch of a mechanism for reinsurance of such risks, says Yakunina. According to her, at the initial stage, to resolve the issue, substitution will be required at least in the volumes and proportions in which it was carried out.

Business problems

A representative of one of the major importers of alcohol told Vedomosti that they initially faced the problem of cargo insurance, but now this problem is no longer so acute. Things are much worse with logistics: the availability of cars, building routes, etc.

Of course, the lack of reinsurance is painful for business – there are interruptions in supplies, a decrease in the diversity of the assortment, says Alexander Kalinin, president of the public organization for small and medium-sized businesses Opora Rossii. There are other problems: the prices for logistics of the Western countries have been increased by 3-4 times, and the well-established supply chains are also violated by sanctions. In contrast to these factors, the problem with insurance has alternative solutions, he continues: there is an advance payment, a change in the supply base, parallel imports, after all.

According to him, suppliers from the EU and the US require 100% prepayment for goods, in connection with which importers are increasingly applying for loans at a preferential rate due to a gap in working capital. “We ourselves previously allowed reinsurance monopolies in Western countries, but there are other markets with their own insurers – for example, in Asia, insurance companies themselves insure export goods,” says Kalinin. In any case, Russian retail chains will show flexibility and reorient themselves to other suppliers – already now, for example, for the first time in supermarkets you can see watermelons imported from Iran; The electronics market is also ready to look for new areas of cooperation, Kalinin concludes.

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