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.”