Exporters warned of mounting insurance claims

It is getting to be a risky
world out there for traders,
with bad debts mounting
in countries around the
globe, according to Credit
Guarantee Insurance
Corporation (CGIC).
Although Europe is rather
a hot-bed of debt defaults at
the moment, it is anything
but alone when it comes to
insurance claims for trade
debts.
“The Eurozone itself
and countries within the
Eurozone, given the daily
litany of difficulties,
have received most of
the international media’s
attention – almost to the
exclusion of other countries
around the world,” said
CGIC’s GM exports, Theo
Reddi. “Undoubtedly the
current financial crisis in
Europe has and will continue
to cause palpitations and
great anxiety amongst
governments, finance
ministers, bankers and,
with good reason, exporters
around the globe.
“But be warned that
payment defaults from a
number of other countries
have recently spiked upward.”
One of CGIC’s leading
indicators is the number
and value of notifications
from insured exporters,
which from December 2011
and January 2012 included
buyers in Australia, Oman
and Dubai, he told FTW.
“Also, whilst the world
looks to Africa for growth
opportunities, the perils that
lurk under the surface cannot
be ignored.”
In Africa, default
notifications received in the
last two months came out of
Uganda, Mali, Swaziland,
Malawi, Congo (Brazzaville),
Botswana and Senegal.
The notifications received
of pending or potential losses
arising from debtor defaults
in Malawi totalled R2.4
million; Mali R4.4 m; Uganda
R5.6 m and even Australia at
R6.8 m. Oman, Dubai, Spain
and Botswana contributed
amounts less than R1 m.
“In fact for the 2011 year,”
Reddi added, “in addition
to claims paid on payment
defaults from European
debtors, claims were paid
for defaults arising out of
Argentina, US and Israel.
Along with this, claims also
emanated from the African
countries of Mozambique,
Nigeria, Ghana, Angola,
Kenya, Zambia, Malawi,
Namibia and Botswana.”
Returning to Europe,
Reddi indicated that, as a
result of the crisis there,
even the risk associated with
securing payment under a
letter of credit (LoC) drawn
on banks in the Eurozone
had increased, due to the
possibility of any number of
those financial institutions
going to the wall.
“Political upheaval on
the African continent as
well as in the Middle East
also poses new threats for
exporters the world over,”
he said. “Consequently,
local exporters need to focus
far more attention on, and
manage, the payment risks
from virtually every foreign
buyer and country around
the globe, as failure to take
significant precautions may
very well result in substantial
losses.”