Contrastación de las hipótesis específicas

There are two main players operating in the Dutch export credit reinsurance market: the government and the private reinsurance companies. The debut of the Dutch government as an important reinsurance institution is dated back to 1922, when the first export credit guarantee facility was established (De Nederlandsche Bank (2002)). In June 2001, the agreement made between the Dutch government and the private insurance company Gerling NCM was reconsidered. The new agreement enabled Gerling NCM to reinsure export credit risks exceeding a three years coverage term by the government. The reinsurance of the risks with the coverage term up to three years was left to the private reinsurance market with some exceptions (see also Box 5.2). The risks mostly reinsured by the government are risks of medium long term transactions.

The Dutch private reinsurance market is internationally oriented. There are about 20 to 30 major private reinsurance companies worldwide, where about 10 of them are important for the Netherlands. The two private rein- surance companies most often named by the private export credit insurers are the internationally operating Munich Re and Swiss Re.

Example box 5.2 Country classification used by Gerling NCM

The reinsurance of the short-term business by the government depends on the country of the debtor. In this context three country-categories can be distinguished:

Category 1 All risks covered for the category 1 countries have to be

reinsured by the private reinsurance company regardless of the size and the term of the contract. The risks being insured are: the non-payment risk caused by political or commercial reasons. Com- mercial reasons are prevailing as reason of the non-payment in the country-category 1. A credit for 10 years for capital goods to these countries is seldom insured. The government might consider rein- suring individual transactions on this market if no capacity in the reinsurance market is available.

Category 2 All transactions in the country-category 2 with credit du-

ration of 2 years and risk horizon up to 3 years have to be reinsured on the private market. There are no limits to the amount of the maximum compensation.

Category 3 In category 3 the most difficult countries are found. For

these countries, there are more limits. Transactions with credit du- ration of 2 years and risk horizon up to 3 years have to be reinsured on the private market. Transactions with the amount of compensa- tion per transaction over e4,500,000 or overe11,000,000 per buyer are reinsured by the government.

Dutch as well as British and American private insurance companies mostly cover their risks spread over 5 to 10 reinsurers. The reasons are: (1) the risk spreading in terms of minimum concentration, and (2) independence consid- erations.

Ad (1): The private insurers try to avoid being dependent of one reinsur- ing company and mostly try to spread their portfolio over several reinsurers. This has the advantage that if one reinsurance company would go bankrupt, the largest part of the portfolio of the insurance company would remain

reinsured by other reinsurance companies. The same reasoning applies to the reinsurance companies, who are not interested to bear a risk of a large amount of claims in the case an insurance company goes bankrupt. So, reinsurance companies always have to decide which part of an insurers’ portfolio will be reinsured. When big insurers are involved, they tend to reinsure part of their portfolio, partly because of restricted capacity, partly because of risk spread- ing considerations as described above. Only when small insurance companies are involved, reinsurance companies tend to reinsure the entire portfolio of these insurance companies, due to administration costs considerations

Ad (2): Insurance companies also want to remain independent from their reinsurers. After high series of losses a reinsurance company may end the relationship with the corresponding insurer. In this situation an insurer rein- sured by only one reinsurance company, would get into problems with finding a new reinsurer. When reinsured by a number of reinsurance companies, the largest part of the insurance company portfolio would remain reinsured after series of losses.

All interviewed export credit insurance companies emphasize the decrease in willingness of reinsurance companies to take over risks. According to them, this is due to the economic downturn. Reinsurers either leave the export credit business and use their capacity to underwrite more profitable lines of business, or they impose stricter requirements on their clients. The property and aviation business, marine and traditional types of insurance providing good returns at the moment, have become more attractive to reinsurers. The additional reinsurance capacity in property and aviation business, marine and traditional types of insurance is expected to create overcapacity and consequently a price drop in these sectors. The price decrease in property and aviation business, marine and traditional types of insurance would make the export credit business once again attractive for reinsurance companies. In the insurance industry this process is referred to as ‘swinging demand’.

Reinsurance companies are able to put restrictions on the insurance terms. Most international operating export credit insurers emphasize that they are restricted in their actions by the reinsurance companies. The main restriction put by the reinsurance companies is a maximum risk horizon between one and two years. The insurance term handled by most private export credit insurers in the Netherlands is still shorter than the two years restriction imposed by some reinsurance companies (see section 5.3.5).

Export credit insurance companies, having enough capital to write busi- ness without reinsurance, are not strongly affected by the ‘swinging demand’

phenomenon. Exporters Insurance Services Inc. and to some extent Liberty Syndicates are two examples of this kind of companies. Exporters Insurance Services Inc. even provides reinsurance services for other insurance compa- nies and Export Credit Agencies. Liberty Syndicates is able to write a limited amount of risks without reinsurance. None of the private export credit insur- ers in the Netherlands has enough capital to write risk on their own books.