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Spotlight on Trade Credit Insurance in Asia Pacific

Holger Schaefer, Regional CEO of Euler Hermes, Asia Pacific spoke to Global Banking & Finance Review upon being awarded Best Trade Credit Insurance Company Asia Pacific 2018 in the Global Banking & Finance Awards®.

Congratulations on your award-winning success, what initiatives do you attribute to your success?

It is indeed delightful to be awarded as the “Best Trade Credit Insurance 2018” by Global Banking and Finance Review. This international-level accolade reaffirms Euler Hermes’s position as an industry leader and proves our potential to reach our goals.

Customers are the centre of everything we do, Euler Hermes’s True Customer Centricity (TCC) initiative is launched to map our customers’ needs, showcasing our commitment to deliver our promises. Also, our Zero Defect initiative where we measure our performance at all touch points that our customers offer. We think this initiative is essential as a quest for perfection in order to improve our quality of service.

How are current political and regulatory disruptions impacting the market?

The Rule # 180 in China: where factoring businesses was no longer permitted. This impacted credit insurance business as factoring sector in China was one of the main customer segments.

Proposed implementation of risk based capital solvency framework in HK: the intention is to better match capital requirements to the risk profile of the individual insurance company and therefore having a more robust capital position. Currently, the likely outcome seems to be higher capital requirements for HK insurers.

Implementation of new accounting standard IFRS17: huge efforts from insurers to implement the adoption of this new standard which is supposed to make financial results more transparent. Financial performance measurement may need to be re-visited based on the new accounting standards.

Holger Schaefer, Regional CEO of Euler Hermes, Asia Pacific
Holger Schaefer, Regional CEO of Euler Hermes, Asia Pacific

Trade credit insurance is expected to grow in Asia Pacific, what are the contributing factors to this and why should customers consider Euler Hermes as their insurer?

Trade credit insurance is comparatively young in Asia, this form of risk management was only introduced in the region 15 years ago. Euler Hermes is eager to promote the product and services as well as our brand, as much as we can. Being awarded by the Global Banking & Finance Review is one of the best ways as it speaks volume about our position in the market and among our business partners. We also make ourselves and the business known through our partners, social media and traditional media.

One contributing factor is the need for cover in a risky environment. We could see that there is an increasing demand from our customers in using trade credit insurance. This is due to the rise of globalization. Also, the fact that China and the US are in the trade-war scenario that stir more needs from the customers in buying credit insurance to protect their account receivables.

Second, Euler Hermes has an advisory role to companies that understand and identify their current vulnerabilities by countries and sectors, help them mitigate the risks they may face down the line. We have around 100 risk experts and we are present 60+ countries all around the world that can help your business grow. And this is almost important as we insure USD900bn of global trade.

Another trend is the continued alignment of Euler Hermes with banking solutions, and the tripartite relationship with customers.

Taiwan office opening
Taiwan office opening

How does credit insurance work?

Trade credit insurance includes a broad spectrum of services, including risk management for customers, credit control on behalf of our policy holders, risk mitigation, claims, debt collection.

Our team of experts do their utmost to protect our customers’ trade receivables. They underwrite the policyholders’ credit risk, continuously assess and follow up on the debtors and give the policyholders access to important information from legal matters to market conditions. Trade credit insurance allows a company to benefit from better protection on cash flow, opportunities for sales expansion and enhanced financing availability.

What are the common misconceptions about credit insurance?

I guess misconceptions may not be an appropriate word, as there are none, except some people mixed Euler Hermes up with the luxury leather goods brand! For industry as a whole, product knowledge starts to spread among businesses as we offer business to business trade credit insurance.

 

You recently launched single invoice cover in Asia Pacific. What is this and how will companies benefit?

We launched the single invoice cover (SIC) solution in Asia in November 2018 as a pilot phase. SIC is provided as an Application Program Interface (API), which allows to display the request for a quote and the cover activation in any given web environment. The API also allows for real-time responses, with users only paying for the times in which it is actually used, rather than for a subscription or long-term policy.

SIC offers a seamless process to provide convenience and efficiency to our traditional clients, but also kicks start the democratization of trade credit insurance to the most neglected business sector in invoice protection: SMEs. The ultimate goal of SIC is to make trade credit insurance more flexible and more affordable.

How does Euler Hermes support the social economic development of Asia Pacific? What does the year ahead look like?

At Euler Hermes, we support companies in APAC to identify sales opportunities, grow their business and protect cash flow. Asia is driving the world’s GDP growth, which continues to be a significant contributor to Euler Hermes’ growth globally. We also help companies safely grow their businesses into new countries and territories. At the same time, if a company insures its receivables, it can create assets on its balance sheet that banks and investors will be interested in. Banks use that secured receivable and will lend against it, which can become useful additional source of cash flow for companies – one that is not tied up to existing credit lines.

The year ahead…well, we have laid down our 2019-2021 strategies and set a very clear goal that we need to grow, but in a sustainable way. We will definitely place more force in digital marketing so as to offer more flexible and customer-friendly solutions to our clients to support their growth strategy.