LONDON – In the wake of the Arab Spring, the eurozone sovereign debt crisis, and the ongoing challenging business environment globally that is continually changing at an increasingly rapid pace, the demand for political risk and sovereign risk insurance especially is, not surprisingly, also increasing. At the recent Third Annual Summit of the Aman Union, the Association of Export Credit and Investment Risk Agencies from the Organization of Islamic Cooperation (OIC) Countries, held in Kuala Lumpur, hosted by the Malaysian Eximbank, Malaysian Deputy Finance Minister Dr Awang Adek Hussin reminded that “uncertainties may also bring in opportunities for players to work together in earnest collaboration with the objective to minimize or manage the risks so that everybody – the buyers, sellers, suppliers and the users benefit at the end.” Adissadikin Ali, Managing Director and CEO of the Malaysian Eximbank, expressed optimism, saying “indeed, (export credit agency) ECA-backed loans for financing are more frequently implemented now.” Malaysia generated over RM1 trillion of international trade in 2011, but recorded only RM2.82 billion of guarantees and export credit insurance in the same year. Dr Abdel-Rahman Taha, Secretary General of the Aman Union and CEO of ICIEC, however, acknowledged that “in discharging our respective missions, we all acknowledge facing serious challenges, mainly related to limited underwriting capacity, critical shortage in reliable credit information, accessibility to reinsurance facilities, recovery of paid claims and shortage of qualified human resources. All these challenges are difficult to overcome by any one single ECA, however, through cooperation among members of the union, we stand a better chance to face these problems and enhance our ability to achieve our mandate of serving our economies in these difficult times.” 2011 was a relatively difficult year for Aman Union members with a decrease in premium written of 31 percent and an increase in claims paid of 51 percent. The average premium rate fell by 41 percent and recoveries by 73 percent for the year. The main obstacles faced by Aman Union ECAs included the lack of reliable credit information on buyers, low awareness amongst exporters, limited reinsurance coverage in higher risk countries, competition especially from western ECAs, the lack of IT infrastructure, low capital base, and the lack of human capital development in the sector.
