October 24-26, 2017
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smaller and there are more start ups.”
Which is not to say that small firms
are lesser clients. Quite to the contrary.
“We become part of the client’s risk
and credit management,” said Daly.
“This is how they expand safely and
is the real growth driver. Say there is a
small manufacturer in the U.S. that has
grown well domestically, and suddenly
gets an order for 10,000 widgets from
Chile, on 30-days’ terms. We can tell
that manufacturer, ‘go ahead, trade, we
know that buyer, we will underwrite the
risk.’ The insurance part is only the last
piece. The information comes first.”
As the U.S. market grows, adding
underwriters and capacity, innovation
follows. “There is a willingness to
write larger single-buyer limits on
sub-investment grade names as well as
policy, the underwriter commits to
insure counter-party risk for the
insured up to a limit, and that limit is
good for the policy year, even if there is
deterioration of the insured’s credit risk.
In a cancellable policy, if there is a
deterioration of the client’s credit risk,
the carrier can give a month or two of
notice and cancel the limit for future
shipments. The underwriter is still
responsible for coverage of existing
receivables up to that point.
Wagman observed that cancellable
coverage is often misunderstood.
“This is not the insurer telling the
client with whom to do business. For
the most part, cancellable coverage is
for smaller businesses that don’t have
their own credit departments and rely
upon the underwriter for that credit
limit decision-making support.”
The growing element in TCI is
lending and capitalization, said Stephen
Atallah, senior executive vice president
for commercial and risk underwriting at
Coface, another of the Big Three global
underwriters. The third is Atradius.
“Supply-chain financing is a big
application for TCI,” Atallah said.
“The banks have discovered this,
and are gulping up capacity,” he said.
That’s led to more product innovation,
Banks that acquire receivables may
be the insureds themselves, or they may
be the loss payee on receivables pledged
as collateral. Sometimes banks require
TCI before they will lend against
receivables, other times they merely
make it known that insured business
gets an advantage on rates and terms.
Atallah noted that hybrid contracts,
with a non-cancellable top tier and
cancellable coverage for the bulk of an
insured’s sales, has been around for a
“Those are a way to address the
common mismatch between what
the client wants and what the carriers
can underwrite. Clients often want
non-cancellable coverage for riskier
customers. The innovation is delayed
cancellation. No one wants to wake
up to find they don’t have coverage.
Pulling a line should not throw a
business into turmoil. So now there is
While carriers might bemoan soft
rates in a competitive market, Clay
Sasse, managing director and U.S.
practice leader for trade credit at
Aon suggested that new entrants are
“Once the recession was over,
everyone was still spooked,” he
recalled. But since then the participants
have increased greatly. &
GREGORY MORRIS is a freelance writer
based in New York. He can be reached at
more ‘non-trade’ type of business,” said
Wagman at Gallagher.
“And there are more carriers willing
to write non-cancellable coverage or
hybrid programs that have both non-
cancellable and cancellable components.”
He stressed that the underwriting
approach taken - cancellable versus
non-cancellable - depends upon the
client’s needs. In a non-cancellable