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  March 5th, 2018 | Written by

Credit and Political Risk Insurance Market Capacity Up

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  • Overall CPRI market capacity has seen a substantial increase across all product lines over the past three years.
  • Maximum CPRI lines for non-payment risks rose by 30 percent in last three years.
  • Since the global financial crisis, the CPRI market has seen 422 claims paid to the value of $2.57 billion.

A new market report from specialist credit and political risk insurance (CPRI) broker BPL Global indicates that overall CPRI market capacity has seen a substantial increase across all product lines over the past three years – with the maximum lines for non-payment private obligor risks and public obligor risks rising by 30 percent to $2.4 billion and $3.0 billion respectively.

The report, based on market surveys and analysis of BPL Global’s own portfolio, also highlights that there is significant capacity for non-trade related credit risks and project finance business. For non-trade credit business the majority of total capacity – $1.5 billion – is available for policies with tenors of up to seven years, although there are still meaningful volumes ($700 million) remaining for risk tenors of 10 years.

“Our report shines a spotlight on the fact that appetite for the CPRI class is on an upwards trajectory – both in terms of capacity and tenors,” said Sian Aspinall, Managing Director, BPL Global. “Furthermore, analysis of market data clearly shows that it adapting its capabilities to match natural return on investment for areas such as project finance structures, providing coverage for up to 25 years. Also notable is the jump in capacity for non-trade related credit insurance to over $1.5 billion–an area previously constrained by Lloyd’s regulatory requirements–and increasing levels of coverage for transactions in OECD countries.”

Analysis of BPL Global’s portfolio–which can be considered reflective of the market as a whole – shows the volumes of exposure the market is willing to absorb: in Africa ($7.75 billion), the Middle East ($6.45 billion), and Latin America ($5.46 billion). Total exposure in BPL Global’s portfolio stands at $41.1 billion.

BPL Global’s total exposure in Europe stands at $3.65 billion, reflecting increasing coverage for project finance and non-trade business in OECD countries.

Since the global financial crisis (2007-2017), the market as a whole has experienced 438 claims made by banks and financial institutions, with 422 paid in full to the value of $2.57 billion. The largest values of claims handled by BPL Global have been on contracts covering Ukraine ($509 billion), Russia ($195 billion) and Brazil ($187 billion).

“The value of insurance is only demonstrated at the point of claim,” said Aspinall, “and the market as a whole has made great strides to provide collated data illustrating this, helping to validate the purchase of the product, particularly when used for capital relief by banks and financial institutions.”