ICBA Blog

Changes in Policies and Politics that affect Trade Credit Insurance in Australia

by Kirk Cheesman

Much has changed during 2013. The Australian dollar has dropped significantly and interest rates have continued to fall. We have a new Government which may or may not be able to implement a number of policy changes.

In September 2013, business confidence was continuing to rise but has now dropped.

So are businesses in a better place at the end of 2013 than they were at the beginning of the year? Statistics show they should be, although ICBA Australia's market intelligence shows there are still tough times ahead. The impact of the impending closure of G.M. Holden Ltd, is a signal that Australia, New Zealand and the Asia and Pacific market must continue to evolve to cater for slowdowns in manufacturing and mining.
 
2014 will be another significant year also because the Privacy Amendment (Enhancing Privacy Protection) Act 2012 will finally be implemented in March 2014. The new laws are the most significant reforms to the Privacy Act in over 20 years. This amendment will apply to the personal information of "natural persons" (sole traders, members of partnerships who are natural people, guarantors who are natural people and directors).
 
Changes include the introduction of more comprehensive credit reporting, which will allow the reporting of information about an individual's current credit commitments and their repayment history information over the previous two years. The new system will be accompanied by enhanced privacy protections and underpinned by a new industry-agreed code of conduct, to be called the 'CR code'. Given the increased financial penalties that apply to a failure to comply with this legislation, it is important for organisations to review and understand their obligations contained within the Privacy Act, Privacy Code and the Regulations.
 
What organizations will need to do:

• Change your privacy policy
• Provide more information to individuals when you collect their personal information
• Implement a privacy compliance program
• Change your direct marketing practices
• Review arrangements for offshore data storage or processing
 
As a trade credit supplier, businesses will need to tailor specific circumstances in regards to privacy. ICBA Australia will be able to assist you in obtaining legal opinion on your privacy obligations and privacy documentation. 2014 will continue to bring challenges to many of our businesses here in the Pacific; however, the staff of ICBA Australia and ICBA New Zealand look forward to continuing to develop and enhance ways to help businesses manage trade credit risks better, and avoid any nasty surprises during 2014.
 
(Kirk Cheesman is Managing Director of ICBA Australia and New Zealand , National Credit Insurance (Brokers) Pty Ltd and a Director of NCI Brokers (Asia) Pte Ltd.)

ICBA Trade Credit Insurance News for December 2013

ICBA Trade Credit Insurance News is of interest to all those involved in the global trade credit and political risk insurance industry.

Please take a moment to review the News, then subscribe and share, if you agree it's useful. December's News includes articles from Coface Group, Euler Hermes, Atradius and ICBA members. Just click into the image below and you will be directed to news.icba-online.com

ICBA UK reinforces commitment to addressing trade credit insurance needs of clients

By Andy Moylan

There have been lots of exciting developments at ICBA UK during the course of 2013 and a number of these initiatives will be rolled out in the first quarter of 2014. Our team's primary focus is client satisfaction, as we try to ensure that this is always the case and we constantly strive to improve the service we offer.

We are committed and focused in developing added value products and services which assist our clients in maximising profit by enabling measured growth.

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ICBA UK has been very fortunate to attend both annual premier broker conferences hosted by Euler Hermes in Cannes. Director, Louise Garden, was recently invited by Euler Hermes to discuss how we, as an industry, can improve Trade Credit Insurance for our clients. Some excellent ideas for new products and policies were seeded and ICBA UK will be working with Euler Hermes over the coming months to develop viable products. ICBA UK also took an active part at the ICBA conference in Tokyo, Japan. This presented an opportunity to discuss market best practice and future Trade Credit Insurance policy enhancements which will benefit many of our clients. 

In a recent client satisfaction survey, 100% of the clients who participated were either very satisfied or satisfied with ICBA UK's service and would recommend us to other companies. This survey also highlighted the reasons behind why companies purchase Trade Credit Insurance. The results were surprising to us and will be published early next year - please stay tuned!

We would like to take this opportunity to wish all ICBA clients, partners and colleagues a very Happy Christmas and a prosperous 2014. As is tradition, ICBA UK will not be sending out Christmas cards but will be donating to a local Charity, St Clare Hospice.

(Andy Moylan is Managing Director, ICBA UK)

ICBA USA Spotlight: Challenges addressed by trade credit insurance

Submitted by ICBA Asia, Brazil, India and the USA via the IRC Read & Delete Monthly

ICBA USA clients don't need trade credit insurance (TCI). If they needed to use it, broadly speaking, they would not be of interest to the underwriters, as they would likely be found uninsurable. Meanwhile, ICBA USA thinks its clients use TCI products to support business ambitions and expansions, rather than to quell fears and neuroses in a too-busy world. This blog post is the result of ICBA USA asking its clients: What was the biggest challenge that the use of trade credit insurance addressed?

The Challenge:  POLITICAL RISK and WORKING CAPITAL and SALES GROWTH predicated upon the offer of MEDIUM TERMS (longer than a year)
Trade credit insurance has allowed us to expand our footprint into new markets where local banks do not offer medium-term financing.  It has also given us peace of mind in markets where there is uncertainty in the market due to the instability. (Insured) sales now account for about 25% of our total sales.   Trade credit insurance has also allowed for financing of inventory used in exporting which most domestic banks will not fund without.
- Texas equipment manufacturer

The Challenge:  FINANCE
We found that having the credit insurance in place allowed us also to facilitate our banking and financial arrangements both in terms of increasing our bank lines as well as reducing the costs.
- Southwest commodities trader: worldwide multi-buyer cover, single-buyer cover in spots

The Challenge:  REVERSE CREDIT INSURANCE in support of PAYABLES FINANCE PROGRAM
We now have improved cash flow, due to the longer payment terms we get from our major suppliers, and this in turn has substantially reduced our borrowing costs (fees and interest).  Our growth has been phenomenal implementing this strategy.  We determine which vendors are able to obtain portions of the available credit limit on us, i.e., for extended terms.  This is, in fact, part of our negotiation to obtain longer repayment terms and larger credit lines.  Our suppliers are able to substantially increase sales to us and, if need be, can even sell receivables to their lenders for earlier settlement of outstandings.
- Western consumer products manufacturer

The Challenge:  RISK MITIGATION and SALES GROWTH  
(Our company) has done business internationally for nearly six decades.  The company’s original philosophy was to take little or no credit risk, especially on international sales.  As a result of this rigid policy (we) had only about 3% of our business in international sales.  In the eight years we have been insuring our international business, we have grown revenues from 3% to 30% of our total.  And this was done without changing the company’s philosophy concerning risk tolerance.  The risk is now mitigated through the purchase of credit insurance.  We have found the processes required by the credit insurance provider to be fairly easy to follow.  This goes from validating the new customer, (and) reporting their monthly sales to paying the premiums. (Our) bottom line has increased significantly as a result of obtaining credit insurance for international sales.
- Western specialty chemical manufacturer, covering sales to Russia, Asia and the Middle East

The Challenge: RISK MITIGATION, SALES GROWTH, INTERNAL CREDIT ADMINISTRATION PRACTICES
We use credit insurance primarily for risk mitigation.  Having credit insurance on our exports gives us the advantage of having a second set of eyes review financial stability and creditworthiness on our foreign customer base with larger exposures.  We are under increased pressure from our sales area and export customer base to grant credit terms and higher credit lines.  Having credit insurance helps manage that risk.  Also frequent country risk updates help us review accounts in risky areas in a timely manner.  This allows us to be more proactive in high risk areas.     
- Southeast Textile Manufacturer

ICBA USA serves ambitious clients, and is fortunate to serve each one. ICBA USA is very pleased to be part of these clients' problem-solving teams.

(ICBA Asia, Brazil, India and the USA agreed to share this post, originally in the IRC Read & Delete Monthly, with the ICBA blog.)

Political Risk Insurance: Political Risk Event of the Month - Canada and EU Comprehensive Economic and Trade Agreement

Submitted by ICBA Asia, Brazil, India and the USA via the IRC Read & Delete Monthly

Earlier this autumn 2013, the Canadian government announced an agreement with the European Union on a Comprehensive Economic and Trade Agreement (CETA), after more than three years of negotiations. Once implemented, this agreement is expected to increase two-way bilateral trade in goods and services by 23% or €36 billion and will remove over 99% of tariffs between the two economies, generating sizeable opportunities in services and investment.

The timing of the announcement is critical for Canada for both economic and diplomatic reasons.  Amidst a struggling domestic economy, in some part due to crude oil pipeline disputes, some critics feel the government has not done enough to affirm that Canada still welcomes external investment - following a rule change that made it more difficult for state-owned foreign companies to invest in Canada’s energy sector.

Nevertheless, CETA will allow European firms to compete for Canadian government contracts, level the playing field for intellectual property rights and lower barriers to trade in the services sector.

The agreement will need to be approved by the European Council and the European Parliament. It is being watched as a test case for the Transatlantic Trade and Investment Partnership (TTIP) now under negotiation between the EU, the US and Canada, but progressing slowly.

Sources: The Economist, European Commission

(The Political Risk Event of the Month blog post is a recurring post, on a monthly basis, at the ICBA blog. ICBA Asia, Brazil, India and the USA, which is International Risk Consultants, Inc. (IRC), has agreed to continue to share these "event" posts with the ICBA blog.)

ICBA UK a finalist for Credit Insurance Broker of the Year

By Andy Moylan

I am extremely proud to announce that ICBA UK has been short-listed for the Institute of Credit Managers (ICM) 2014 Broker of the Year Award. To view the shortlist please go to this page. To have been short-listed in the top three is a huge achievement.

Formed over 70 years ago, the Institute of Credit Management (ICM) is Europe's largest credit management organisation and a trusted leader in expertise for all credit matters. It is the only such organisation accredited by Ofqual and it offers a comprehensive range of services and bespoke solutions for credit professional as well as services and advice for the wider business community.

Whilst the winner of the ICM Award will not be announced until February 2014, the ICBA UK team is extremely proud of achieving "finalist" status for this award. ICBA EFCIS has strived, in the last few years, for exceptional levels of service and product innovation for the benefit of our clients.

"We would like to take this opportunity to thank you all for your support and belief in our passion to make a difference in the way credit insurance is serviced and perceived in the market."

(Andy Moylan is Managing Director, ICBA UK)

Congratulations to ICBA New Zealand for excellence in export support and trade credit insurance

by Kirk Cheesman

I am proud to announce the ICBA New Zealand team was a finalist in the Auckland University of Technology (AUT) Business School Excellence in Business Support Awards in the $5-$10 Million Turnover category and the Export Support category.

Noteworthy is the high calibre of all the fellow finalists, which highlights the level of achievement at ICBA New Zealand for reaching the finals in two categories. ICBA New Zealand's support of a large export client base was recognised by the judges, along with the increasing support now provided to clients trading on credit terms domestically in New Zealand. Domestic and export credit insurance is a growing product and risk tool in New Zealand, not only used for protecting profits, but growing sales in new markets.

David Meys, Phil Ashby and Shern Graham of ICBA New Zealand

David Meys, Phil Ashby and Shern Graham of ICBA New Zealand

The AUT Business School Excellence in Business Support Awards recognise organisations and individuals that make a significant contribution to growing businesses in New Zealand. The Awards Gala Dinner, held at Auckland's Langham, was attended by over 700. It was a fantastic night celebrating the successes of the finalists and winners in the annual awards. ICBA New Zealand congratulates fellow finalists and the winners in each category.

(Kirk Cheesman is Managing Director of ICBA Australia and New Zealand , National Credit Insurance (Brokers) Pty Ltd and a Director of NCI Brokers (Asia) Pte Ltd.)

Update: ICBA 2013 global trade credit insurance conference

By Rob Downey

Mercedes Plant (ICBA USA Chairwoman), Jordan Deng (Director, Asia), Tracy Chen (Director, China),  Miguel Carranza (Head, Houston), Kristine Hofstra, (Global CIO for ICBA USA and ICBA global) and Rob Downey (tourist extraordinaire) represented ICBA USA during the 2013 plenary session of the International Credit Brokers Alliance (ICBA), annual meeting in September 17-19, in Tokyo, Japan.  It was the 23rd such congress in the fifteen-year history of ICBA; the 16th attended by ICBA USA since 2004.

Conference sponsor ICBA Japan created an atmosphere perfect for three days of focused discussion and a robust exchange of ideas.  Delegates heard presentations on: the newest ICBA offices now open in Luxembourg and Mauritius; non-insurance revenue streams; new insurance products; new sources of credit information; logistical ideas that will impact future trade flows; coming information technology; new insurers; geographical targets of interest to ICBA for membership opportunities in the future; coverage issues; legal differences around the world; lenders’ concerns; and statistical analyses of present membership activities with the more than three dozen insurers presently available to various ICBA members. The Japanese hosts then graciously leavened the day-long intensity each evening with entertainment that included a dinner cruise on the Sumida River, a karaoke sing-a-long beneath a full moon, and the national Tokyo Sumo tournament.

ICBA USA delegates returned home refreshed in the strength of the ICBA partnership and with renewed zeal for seeing it grow. As reported to our peers,

ICBA integration remains the industry standard, a model that no others can match, even the large P&C brokerages who serve as our nominal "competitors."

Forty-five ICBA USA members have worked on ICBA deals in the past ten years; thirty-five have traveled overseas to meet with our global ICBA colleagues somewhere in the world.  ICBA members cooperate on a daily basis to provide the “glocal” solutions for which they are world renowned, i.e., providing  hundreds of multinational clients with local service and globally-integrated solutions.  ICBA members perform this work seamlessly and without regard to national competitiveness, borders or cultural barriers, using offices in fifty cities on six continents all unified by a shared contact management system, and a single IT strategy.

Here's looking very favourably towards a strengthened global and local ICBA organization in 2014!

(Rob Downey is one of the founding partners of  ICBA USA aka International Risk Consultants, Inc. (IRC) – a globally-integrated trade-finance and credit insurance specialty brokerage, which serves as the operating member of ICBA for Asia, Brazil, India and the USA)

Economic growth vs sporting success: how trade credit insurance fits in

By Kirk Cheesman

Given the recent poor form of Australia's sporting teams, I investigated if there was any parallel between our sporting success and economic growth.

I drew data from 1987 but concentrated on the last decade. Sporting results from World Cup rugby, cricket, Olympics, tennis, soccer and netball were extracted. This was then compared to economic statistics including unemployment, the Australian dollar, annual GDP growth and population growth.

Having weighted each result, I came up with this graph:

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At the beginning of the decade, Australia's sporting successes outstripped the Australian economy's success. However, during the mid 2000s onwards, economic growth outweighed sporting results. Since 2004, the economy's success has outstripped our sporting success... until 2012.

As Australia did not have an overly successful 2012 sporting year, this tells me the economy has also fallen well behind in its position. Since the height of our economic growth in 2007 and 2008, the economy's success has almost halved. At the same time, our sporting results in 2007 have dropped considerably over the past five years.

So, does this mean if Australia starts winning the Bledisloe Cup, the Ashes, an upcoming tennis Grand Slam or the soccer World Cup, there will be a direct impact on Australian economic growth? And where does trade credit insurance fit in? Can ICBA Australia have a significant role in both types of successes?

There's actually a good chance of this. Domestic and export credit insurance is a growing product and risk tool in both Australia and New Zealand, not only used for protecting profits, but growing sales in new markets. Up with the economy! Up with competition! I hope both areas are in for some immediate successes soon.

(Kirk Cheesman is Managing Director of ICBA Australia and New Zealand , National Credit Insurance (Brokers) Pty Ltd and a Director of NCI Brokers (Asia) Pte Ltd.)