Reinsuring export credit agencies: What drives demand?

ECAs play a crucial role for economic growth by facilitating international trade and investment; especially in times of geopolitical tensions and an increasingly multipolar world. By offering trade credit insurance, investment guarantees and by providing equity and export finance, ECAs finance and/or mitigate risks associated with cross-border transactions. In 2023, public agencies provided USD 2.5 trillion in payment risk protection alongside private market players. This extensive support not only protects exporters from potential losses, but also stimulates economic activity and job creation.

Demand for private reinsurance from public ECAs is substantially influenced by several dimensions: The ECA model related to full faith and credit and the intervention principle, the product offerings of the agency or bank, as well as real services and business diversification (driven by operational capacities and size) have a strong relationship. The same applies for managerial discretion related to an ECA or EXIM legal setup and governance. The impact of financial strength in terms of authorisation and/or capital as well as regulation on reinsurance demand is less clear.

ECAs can develop and strengthen existing strategic partnerships and knowledge transfer with leading private reinsurance companies. This provides agencies with improved access to global market knowledge, advanced risk modelling and enhanced underwriting capabilities. By establishing strategic partnerships and standard channels and routines for regular information exchange, ECAs can access and benefit from reinsurers' market intelligence, including industry conferences and direct consultations.

ECAs can work with reinsurers to adopt their risk assessment technologies and create more innovative products. This collaboration can include the use of state-of-the-art software, predictive analytics and actuarial services tailored to the specific needs of public agencies. Collaboration can improve the accuracy of risk assessments, leading to more informed underwriting decisions and improved risk mitigation strategies.

Working closely with reinsurers on claims management and loss adjustment processes is another opportunity for ECAs. This might include the development of joint claims handling protocols and participation in shared loss adjustment processes to streamline claims management, joint investigations, collaborative data sharing, and co-development of claims handling guidelines.

Simone Krummaker is an Associate Professor of Insurance and Associate Dean of the MSc Programmes at Bayes Business School, City, University of London. Before joining academia, Simone worked for more than 10 years in the insurance industry in several positions such as underwriting and controlling.

Andreas Klasen is a Professor of International Business at Offenburg University, Honorary Research Associate at the University of Oxford and an Academic Visitor at Brunel University London, which he will join as full Professor in November 2024. Before, he was a Partner with PwC, as well as Managing Director and Co-head of the German ECA.