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CPRI in trade finance report 2021

TXF Research’s CPRI in trade finance report is both timely and extensive, taking a more forensic look at the health of the private insurance market during the pandemic, as well as the opportunities and challenges ahead.
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The credit and political risk insurance (CPRI) market has proved robust in terms of capacity and claims during the economic bulldozer that is the Covid-19 crisis, according to TXF Research’s CPRI in trade finance report. From new clients spawned amid the growing importance of CPRI product suites to a potential uptick in insurance premiums for users of trade, export and project debt, there will be a plethora of opportunities and challenges for brokers and insurers going forward. 

Heightened geopolitical tensions against a fragile global economy mean that corporates across the trade sphere are more focused than ever on the loss potential posed by political and credit risks. Recent events involving the sudden collapse of companies - especially in the Asia-Pacific commodities sector - have underlined the importance of having trade credit protection in place. 

The perpetual state of change over the past year has created challenges to the availability of up-to-date information to identify risk, and how to price that risk, which means underwriters can’t always accurately assess the credit and political risks of an associated project or deal. So calls for greater transparency in trade finance insurance are amplifying, and will continue to against the screams of the imponderable Greensill saga. 

CPRI product offerings have, so far, performed well - but claims have not materialised in the volumes expected at the beginning of the Covid crisis. It is still early days, and as state support unwinds in various markets at different rates, sentiment may change too, as will the need for restructuring. 

Insurance helps mitigate risk and facilitates trade, but that comes at a cost. In the crisis, was it expensive, and was it worth it? Inquiries for credit risks on private obligors, as against, public obligors have been very high over the pandemic. 

With applications for CPRI cover ballooning in the Covid epoch, concerns from market players around potential constraints on capacity and risk appetite are very real. And a claims crisis could still hit. But it is foolhardy to try and predict such a black swan event for the CPRI market. 

Instead, there is another swan on the horizon - a ‘green’ swan - given the stronger focus from investors and lenders on financing the energy transition. And the private insurance market will play a key role in absorbing the residual risk on medium/long-term ECA-backed deals, reinsuring ECAs, and wrapping up project debt, especially in the renewables sector. 

Building back better is the mantra in many markets after the crisis, and the importance of ESG-related finance is increasingly in the spotlight. But the private market will increasingly be called on both to cover and, paradoxically, also to ignore the non-renewables market. It will be an interesting balancing act. 

We’d like to thank the 91 survey respondents, and the 15 interviewees who added context to the survey results, for their time in contributing to the survey and their valuable insights and we’d welcome your feedback so this valuable research can be deepened in the future. 

To buy or find out more about the report please email [email protected]

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