This year’s unprecedented events, specifically the COVID-19 pandemic, has set a tone of adaptation over the last several months. Rather than focusing on growth, most companies, including the insurance community, quickly switched to a survival mindset due to the uncertainties evoked by the global pandemic. Now that the realities of COVID-19 and its impact on the domestic and global economies have become a bit more clear, companies are able to strategize for Q4 and into the new year, and insurance companies are in a better position to underwrite and quote new business.
While there is no doubt that all industries were affected by COVID-19, some have fared better than others while some have even benefited. There are certain industries that were able to pivot their business, and this flexibility is evident in their booming sales. Looking forward to the next 9-12 months for the trade credit insurance industry, capacities are coming back; however, there is still a heightened level of caution and limited availability of credit in specific sectors. New customers seeking coverage are in a highly competitive market for capacity, so their ability to differentiate themselves and convey why their risk profile is acceptable will be a critical component of whether or not they are ultimately able to obtain coverage.
There are several ways a company can make its portfolio more appealing to potential underwriters. First, having a clean A/R aging is important to show that the company has a good handle on collections and maintains customer payment terms accordingly. In addition, having flexibility with risk share percentages will help to attract coverage, especially in the early years of the relationship. This flexibility creates more of a partnership and can be very beneficial for obtaining coverage on higher risk profile buyers. It is also crucial that a company tell its story in a compelling manner in order to best portray its business. We, too often, see companies submit an application for coverage without clearly articulating why its business model involves less risk than what may be perceived. Working with a knowledgeable broker to help articulate this story can be very beneficial.
In addition to details about the business, it is important to convey confidence to the underwriter that there is a close customer relationship with the company’s buyers, thus reducing the risk of a potential loss. The better this message can be relayed to underwriters, the more successful a company will be with obtaining coverage.
Coverage is easier to come by in the industries that have thrived, whereas coverage is limited in other industries. Regardless of what industry, however, strategically telling the company’s story can help a company safely grow sales, offer flexibility to finance this growth, and have a positive outlook coming out of COVID-19.
About Impello Global
Impello Global is a trade finance advisory boutique and trade credit and political risk insurance brokerage, headquartered in Seattle, Washington with offices in Oregon and Idaho. We specialize in trade credit and political risk insurance and provide advisory services to companies and lenders who are looking to expand their global trade capabilities. Our team has a combined 50 years of experience working EXIM’s programs, as lender and as insurance broker.
If you are a lender or a company trying to better understand EXIM Bank and the programs that they offer, our team would be delighted to learn more about your business and discuss options available to you. Please visit our website at www.impelloglobal.com or contact us directly at EXIM@impelloglobal.com.