‘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.”