As global economic recession deepens, Asian businesses look to protect revenue streams

Many Firms Eye Trade Credit Insurance to Protect Receivables, Enhance Credit Access

Singapore, 23 March 2009 - As the global economy remains in recession, a growing number of Asian manufacturers and distributors are looking for effective ways to protect their revenue streams. 

In particular, firms marketing their goods and services to vulnerable industries or for export are seeking trade credit insurance to guard against the possibility of a default by their business partners.

Demand for this coverage has skyrocketed in the past year, government programs have been instituted and insurers are now cautious about what they are willing to cover and what they charge for the coverage.

Marsh, the world's leading insurance broker and risk advisor, reports that insurers not only are being more cautious about the trade credit risks they are willing to accept, but are declining a significant percentage of applications for this coverage. As insurers look for ways to manage their trade credit risk portfolios, many are shying away from programs aimed primarily at industries severely affected by the downturn. They are also charging as much as 20 percent or 30 percent more to renew existing policies and demanding larger deductibles and higher coinsurance. 

At the same time, these insurers are focusing greater attention on smaller and less complex exposures, as well as on programs that are not focused around troubled industries. 

"The shift in focus among insurance companies to more manageable programs represents a significant opportunity for mid-sized businesses to purchase this coverage for the first time or to expand their existing credit insurance programs," said Richard Green, senior vice president and head of Marsh's Trade Credit Practice in Asia. 

"In this difficult economy and credit environment, this insurance can provide significant benefits to a business both in terms of protecting critical revenue streams and possibly enhancing a firm's overall credit picture."

In some instances, financial institutions may view insured receivables more favorably in determining a company's overall credit profile.
                
"Trade credit is one of the more versatile insurance products available," Mr. Green added.  "It can be structured to apply to one major business partner or to insure an entire book of business in specific geographic markets.  The coverage also can be concentrated on key accounts or customers."

According to Marsh, businesses seeking to buy credit insurance must be able to present clearly to insurers how they audit and review their current exposures, along with how they manage these risks. 

"Being able to demonstrate sound credit management procedures is also important for discussions with insurers," said Mr. Green.  

Contact
William Sargent
+65 8139 7400
william.sargent@marsh.com

About Marsh
Marsh, the world’s leading insurance broker and risk advisor, has 24,000 employees and provides advice and transactional capabilities to clients in over 100 countries. Marsh is a unit of Marsh & McLennan Companies (MMC), a global professional services firm with more than 54,000 employees and exceeding $11 billion of annual revenues. MMC also is the parent company of Guy Carpenter, the risk and reinsurance specialist; Kroll, the risk consulting firm; Mercer, the provider of HR and related financial advice and services; and Oliver Wyman, the management consultancy. MMC’s stock (ticker symbol: MMC) is listed on the New York, Chicago and London stock exchanges. MMC’s Web Site is www.mmc.com.  Marsh’s Web site is www.marsh.com.