In a Landmark $50 million Deal Supporting Cross Border Trade, ATI Covers a Global Manufacturer Operating in East Africa
NAIROBI, 7 November 2012 – What do you do if you are a global company looking to sell your goods throughout East Africa while avoiding the potential pitfalls of default risk related to cross-border transactions? For an Asian-based multinational supplier of industrial chemicals and raw materials to the plastics industry the solution was simple. They instructed their East African branches to approach ATI for cover against payment default risks on 225 buyers spread over Kenya, Tanzania and Uganda. The deal will see ATI insure $50.5 million worth of turnover – the largest volume ever insured on a trade credit transaction by ATI.
Trade Credit Risk Insurance in Africa has several built-in challenges. The primary challenge is obtaining accurate financial information on local companies. This is essential in order to assess whether the company is able to pay your client. Typically, the process of obtaining credit information on one company may take weeks and even months. So, understandably the prospect of covering 225 buyers could potentially be tricky.
To manage this challenge, the policy incorporated several unique features which display the flexibility of ATI’s approach. First, the policy gives a $25,000 discretionary credit limit to the client enabling them to approve up to 133 buyers themselves. And secondly, the parent company needed a solution to harmonise with their multi-currency billing environment. In response, ATI’s policy also takes this into consideration by allowing the client to be paid in the currency in which it bills. In this case the policy will pay out potential claims in both US dollars and in local currencies (Kenya Shilling, ‘KES’, Tanzania Shillings, ‘TZS’ and Uganda Shillings, ‘UGX’).
“Over the past year we have been retooling our Trade Credit Risk Insurance product to provide more adaptable solutions to the challenges faced by companies engaging in cross-border transactions. Increasing support of intra-regional trade is a priority for ATI and in the coming months we hope to roll out a host of tailored solutions for both SMEs and Global corporations”, commented Humphrey Mwangi, ATI’s Senior Underwriter.
As its name implies, trade is an important part of ATI’s mandate. In an attempt to strengthen support in this area, the organization recruited in 2011 Jef Vincent, a Trade Credit Insurance expert with three decades of global experience, as its Chief Underwriting Officer. In his first year on the job Mr. Vincent has laid the ground work for increased marketing and an approach that is more responsive to the needs of clients requiring trade credit insurance products.
As a result of this renewed focus on Trade, ATI expects to launch by the end of this year, credit insurance products for banks, which will cover on a portfolio basis the SME clients of banks; and surety bonds that will primarily increase local capacity by supporting banks and insurers on a reinsurance basis. And by 2014, ATI expects to put in place an automated underwriting platform that will enable it to manage higher volumes of policies faster and more efficiently.
