WHAT ABOUT TRADE CREDIT INSURANCE?

One insurance business line that sits pretty in economic realms but commands little attention from consumers concerned with protecting themselves against risks of car accidents and medical emergencies, is trade credit insurance. This specialty niche, which has exactly one Lebanese provider in the Lebanese Credit Insurer (LCI), has seen demand growth in many countries because companies everywhere worry increasingly about risks that trade partners, especially smaller companies, might go bankrupt in the long economic aftermath of the global COVID-19 pandemic. To protect their deliverables and invoices, sophisticated corporate clients across diverse economies are thus stepping up their usage of trade credit insurance, explains Karim Nasrallah, the general manager of LCI.

He tells Executive that LCI benefits in some sense from the corporate demand for securing their assets in trade but admits that the market outlook of trade credit insurance in Lebanon, while perhaps not as downcast as that for mass insurance lines, is nonetheless challenging. “There is not much growing demand but there is a strong willingness [by large corporate clients] to stay insured,” he tells Executive, explaining that the market on one hand has moved to shorter term or cash invoicing and overall shrunk due to increased reliance of traders on cash in the absence of credit and banking facilities. On the other hand, “volumes have gone up because of increasing prices [of traded goods]. Thus for us premium income is stable or slightly growing but this is mostly due to our stable portfolio [of corporate clients],” he adds.

In the economic crisis of 2020, “we have suffered, like most in the sector. [It was] not too dramatic but we had bad results,” he concedes before explaining that the best outlook for his insurance specialty now is in exportation focuses and aspirations of Lebanese manufacturers and producers. “People see the necessity to grow exports and bring fresh currency into their businesses. Demand for export credit has been growing and this is the only thing that we have been able to grow our business in,” he says. Changing products and service structures allowed LCI to better satisfy market demand in the new economic situation of Lebanon and increase the insurer’s ability to serve exporters with adequate protection of their invoices and not erode the value of an eventual claim when an invoice in hard currency might be insured by a premium paid in local dollars. LCI to this end has redesigned a formerly combined export and domestic credit reinsurance treaty into a more attractive treaty split into export and domestic coverage terms. This treaty, which has been in force from January, has motivated clients to activate pending policies, Nasrallah says: “We had to adapt to the market to keep business going.”