When and why did you start in the credit insurance industry and which stations have you been through to this day?
FL: I ended up in the credit insurance industry by chance in 1988. Actually, my goal was to bridge just 2-3 years before studying. Then things turned out very differently because I found the business extremely exciting. The study program became then part-time and I stayed at Euler Hermes for 25 years before moving to Atradius as Country Director Germany in 2014.
JS: I ended up in the industry quite by chance as well. However, I enjoyed the variety and the exchange with companies from all industries and from small to large. After 5 years at Euler Hermes, I worked for a factoring provider for 4 years. I am now responsible for Partner Management and for the North-West region at Atradius Germany.
Frank, what has changed most in the credit insurance market between 1988 and 2021?
FL: When I started in the industry back then, it was said that this was a purely national market. That has changed until today. The credit insurance industry is now completely globalized and there is hardly any other industry in which you have as much international influence as we do. The role of brokers has also changed in the last few decades. In the beginning, the brokers were the extended sales arm of the credit insurers, in order to sell the product in an untapped market. Nowadays the credit insurance market is very saturated, especially in Europe. The broker today has less of a sales function and is seen much more as a risk advisor, who ensures on behalf of the customer to choose the right provider and the right contract modules.
Jan, you are responsible for Partner Management at Atradius in Germany. How many credit insurance brokers are there in Germany and what developments do you see in the broker industry?
About 120-150 credit insurance brokers live from brokering credit insurance contracts and their peripheral or sister products, such as factoring, fidelity insurance and surety in Germany. There is a diversified mix of small family businesses through to international brokerage houses with their own credit risk departments. However, we are seeing a slow wave of consolidation in the broker market. Many brokers are owner-managed and an often missing succession plan leads to merger talks with larger providers. However, not every broker will be able to sell its customer portfolio, as customer relationships mostly depend on personal contacts. However, this personal trust that has built up over the years is often lost in a merger.
What changes do you see coming through digitalization for the credit insurance industry and brokers?
FL: Of course, digitalization also has a major impact on our industry, on the provider and broker side. With digitalization, customer satisfaction should also be further improved. You can see 2 different digitization trends:
- SME: Digitalization will make the currently quite complex product simpler through standardization and bring it into the as yet undeveloped SME segment via platforms (either directly or indirectly via brokers).
- In the case of medium-sized and / or international companies, digitalization will improve the connection between customers ‘ERP systems and credit insurers’ systems in order to automate the management of limits as well as the automatic handling of obligations. There are already fully automated credit insurance solutions in this customer segment, but they are likely to expand rapidly. Behind this is a complex and individual contract, which continues to require broker advice.
However, you have to ask yourself who will invest in and provide this automatic connection. The large credit insurers and a few brokers have already invested large sums in solutions that are now also available and will therefore remain and / or become even more relevant for customers. Smaller providers, who do not have the budget for high IT investments, have to be careful not to lose relevance or even to disappear from the market in the end.
Let’s talk about the of re-insurance schemes in times of the Corona crisis. How can an orderly transition from a state-subsidized reinsurance solution back to private-sector reinsurance work? And can credit insurance provide customers with sustainable added value in a very difficult risk environment even without government subsidies?
FL: There will be an orderly transition from a state-subsidized reinsurance solution back to private reinsurance. The credit insurance market has long-standing relationships with the reinsurance markets and the reinsurers at Atradius are all ready to take on the cover again. Clearly, the risk environment has worsened over the long term due to Corona. In this situation, the key to the continued long-term success of credit insurance will be the quality of the individual credit risk assessment and the identification of the actual “bad risks”. Although many credit insurers manage their risk portfolio using their own credit ratings, these are mostly based on historical (balance sheet) information, which in many cases is hardly meaningful due to the spontaneous impact of Corona. In order to provide our customers with the best possible support, we cannot avoid an individual credit risk assessment that analyzes the effects of the corona crisis on the various companies. Possible portfolio streamlining measures based on historical ratings would only jeopardize customer confidence in credit insurance and are therefore not expedient in my opinion.
Jan, one last question for you: why do you think the demand for credit insurance hasn`t explode during the Corona crisis?
In my opinion, many companies were / are still very busy with themselves and are not yet able to fully assess the enormous increased credit risks they are facing. I am sure that the demand for credit insurance and the relevance of the product will increase again after years of stagnation. Many companies will decide to implement credit insurance for risk transfer and risk prevention. Nevertheless, there will also be companies who will recognize that their decision to buy credit insurance is too late.
Thank you for the interview
Frank Liebold & Jan Schaber
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