Underwriters sour on export credit & political risk as clouds gather

Export credit underwriters are souring on outlook as strong to-date trends for credit and political risk cover butt up against the threat of economic slowdown and continuing dampening of risk appetites, the Berne Union said of its quarterly sentiment survey among export credit insurers.

Despite the strong trend line on demand growth, “caution looks set to prevail in Q4, with further tightening of appetite from underwriters for both short-term and mid-to-long-term risks, driven by the gloomy economic outlook heading into 2023, as well as the continued volatile geopolitical risk environment.”

Risk appetite overall has remained “subdued since the start of the year, and the shock of Russia’s invasion of Ukraine,” authors noted.

For the Q4 reading, current and expected risk appetite fell for both public providers and private insurers, although readings remain well above points recorded in Q1 when Russia’s invasion of Ukraine first threw the survey panel from its 2021 exuberance.

Growth has been strong in short term commercial and political risk cover to date 2022 and into the year-end thanks to good terms of underlying trade, but the clouds on the economic horizon can eventually cap that sentiment.

“Short-term credit has seen strong growth in demand throughout 2022 on the back of high commodity prices,” authors noted. “While this is expected to continue into the final quarter of the year, the rate will drop considerably, in line with an expected slowdown in merchandise trade growth and commodity inflation.

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