Insurers Need Credit for Payment Record

London market credit insurance policies saw payment of 100% of all valid claims made by regulated financial institutions on time and in full in 2018 and 2019, according to new research.

The Lloyd’s Market Association (LMA) and the International Underwriting Association (IUA) published the result of their annual research into the performance for the credit insurance sector.

The analysis found the market paid more than $3.3 billion in claims between 2007 and 2019. The data was provided by the leading brokers of ‘single situation’ transactional credit insurances. Only a small minority of claims – 15 in total since 2007 – were not paid in full, in each case because the insured did not comply with a policy obligation that was within their control. However, despite this, more than $53 million has been paid towards these ‘compromised’ claims. There were no new ‘compromised claims’ in 2018 or 2019.

David Powell, Head of Non-marine Underwriting at the LMA, said: “This research proves what we already knew: London’s claims performance is outstanding. The market’s insurers provide banks and other lenders with a reliable, flexible, and reactive form of inexpensive contingent capital which should be considered in the calculation of their required regulatory capital. A potential increase in claims as a result of the pandemic lockdown will not impair our members’ ability to pay, as I expect our investigation of this year’s claims performance will show in 2021.”

Chris Jones​, Director of Legal and Market Services at the International Underwriting Association said: “IUA member companies play an important role in supporting financial markets with reliable and robust credit insurance cover. This claims data clearly shows that such policies respond effectively in the event of a loss, which needs to be better reflected in the assessment of regulatory capital requirements.”