‘Keep your insurance under one portfolio’

Keeping one’s insurance under one portfolio makes sound business sense, especially when cash flows are under attack. This is the advice from underwriters as more banks expand their business and move into the insurance world offering insurance for letters of credit they are issuing. Associated Marine chief operating officer Mike Brews says it is important for exporters getting letters of credit from a bank that they are not obligated to insure these with the bank. “Most banks insure letters of credit on a oneoff basis,” says Brews. “This could mean higher rates whereas you will get a more competitive rate if you keep your entire portfolio under one roof.” According to Brews, consolidating one’s business in postrecessionary times remains important. With cost-cutting still high on the agenda, most customers continue to look for the lowest rate and the widest cover. “We insure exporters and importers all the time and are therefore well in tune with the needs around trade finance insurance.” Brews says one challenge, however, when insuring letters of credit is that requirements for insurance are sometimes not reasonable. “Bank requirements for the insurance of letters of credit is sometimes not in line with marine insurance and in some cases not even possible. This is even so when the banks themselves are doing the insurance. There is a definite knowledge gap about the restrictions that are applicable for this type of insurance.” On a positive note, however, trade seems to be increasing and volumes are up following the recession in 2009 that saw imports decrease by a whopping 30%. “We are hoping to see some growth in 2011 following two difficult years. Trade has definitely improved and the outlook is positive.”