Credit insurers

There is still a long way for credit insurance to boom in Colombia, despite the growing awareness in the past year.

How is the Colombian market adopting credit insurance solutions?

MANUEL ARÉVALO Credit insurance market in Colombia is still small in relation to its GDP, and the country has been trying to develop a better appetite for risk-mitigation solutions. In credit insurance, there have been the same three players for over 15 years. Even though we have made a huge effort to bring credit insurance to SMEs, penetration is extremely low. Subsequently, the premiums of the market remain low, with penetration around 0.3 %. In comparison, Chile is still the largest market in terms of penetration in the region and is almost four times bigger than Colombia. Given the current economic situation, credit insurance will gain traction. Companies will prioritize risk-mitigation in matters of insurance because they now are aware of the impact of emerging risks like COVID-19 and the consequences on cashflows and continuity of their operations.

From that perspective, demand for credit insurance is expected to grow faster in 2021.

How can Solunion contribute to the adoption of credit insurance solutions in Colombia?

JORGE ANDRÉS JIMÉNEZ CÁRCAMO Solunion’s role in Colombia is that of a trailblazer; we must be at the forefront of innovation. The company has a direct presence in five cities across the country and is committed to developing the market culturally and geographically. Because we represent 59% of the market share for credit insurance, we are aware of our role in the product’s development. The market conditions are clearly favorable, and we are focused on bringing those trends to fruition. Solunion has expertise and experience, specifically in emerging markets. Additionally, as a result of our joint venture we have

many instruments at our disposal to become bigger and even more important in the Latin American context.

How would you describe business growth in 2020?

MA We are closing a very good year in terms of growth in both business lines: in credit insurance, we are growing at a rate of 16%, faster than the average of the market (13%) whilst our bonding business line has been growing much faster, almost doubling the premiums achieved in 2019. Demand for credit insurance has not picked up yet because most of the companies have been struggling and are therefore focused on maintaining cash flows in order to survive. As the level of claims is expected to increase in 1Q2021 as support and loans from banks will gradually decline, some companies will not be able to meet their commitments in terms of payments, and then payment defaults and insolvencies may arise. When the market starts to see defaults growing, the demand for credit insurance will rise. We expect growth rates to soar in 2021.

JAJC 2020 was a key year for Solunion in terms of product innovation, and we prepared extremely important releases that will come out in 2021. We are working on products that are specifically useful for small and medium Latin American companies. For instance, we created a product that offers coverage under specific contracts for medium-term obligations of credit. We are also working to launch a collection of services focused on grading; we will sell ratings to companies. In 1999, when Solunion arrived in Colombia, our focus were medium and large companies. now we are shifting to the market of small and medium companies. 2021 will be a landmark year for Solunion’s products and services. We are finalizing an agreement with a Colombian bank that would allow it to distribute our credit insurance solutions.

What is your business strategy for the coming years?

MA We have to remain focused on our business model—going for medium businesses. That means supporting SMEs by providing a tailor-made service. Our product development plans are geared to this effect. One product we are developing gives companies that cannot pay full-rate insurance coverage, coverage for their sales. Simple products will democratize insurance and support Segurexpo’s growth. We also want to leverage financing and are focused on building alliances with banks and financial institutions in order to extend cash flow alternatives to our clients. That is an important part of our strategy because businesses need coverage and access to financing. Credit insurance is one of the best and easiest ways for companies to increase their access to capital at softer rates than can be negotiated with the bank.

JAJC Solunion’s strategy is to be a multichannel company. The Colombian market has potential, but Solunion must expand the way it reaches new clients. Classic brokers and banking are two key ways the company disseminates its products. We have a distribution agreement with MAPFRE’s network of local brokers and utilize direct channels as well. Agreements with local associations are important for Solunion’s credit insurance solutions to become better recognized by local businesses. The traditional ways of selling credit insurance for the last 20 years have been classic direct channels and specific brokers. Solunion is committed to the transformation of the insurance market and wants to be a multichannel company that reaches clients through innovative and creative means. The market is there but we need specific tools to increase penetration.