In a recent statement released by the International Credit Insurance & Surety Association (ICISA) members are concerned about a possible further deterioration of the business environment brought on by sovereign debt, in particular in the European Union (EU), the US and Japan, and a lack of adequate financing by banks.
These external factors have had a negative effect on the business outlook of ICISA members. However, growth is seen in Asia and in Latin America.
Mike Truter, CEO of Credit Guarantee Insurance Corporation (CGIC) said: “The deteriorating trend in country ratings and rising corporate insolvencies appear likely, especially in Europe. Obviously it is hoped that the recession in the region will be shallow and short-lived, but nonetheless corporate payment defaults are expected to display an upward trend as a consequence.
As far as the SA market is concerned, Truter added, a softer growth trend, relative rand weakness, rising inflation and cost pressures are adding to an already ultra-competitive market where margins are under continual pressure.
“Consequently,” he said, “the improvement in business payment behaviour may come under increasing strain this year.”
ICISA expects adequate reinsurance capacity for the trade credit and surety sectors to remain in place in the coming year. Higher claims and a deteriorating corporate outlook may cause the reinsurance market to harden somewhat.
