2019 Asia Market Review How can the C-suite manage volatility to drive performance?2 2019 Asia Market Review Content Innovation Increased credit risk volatility as business models evolve, driven by the fast-changing digital landscape and changing consumer buying behaviours; and Optimising working capital by leveraging (i) cash tied up in accounts receivables, (ii) supply chain financing, and (iii) alternative capital solutions. Brexit, trade wars, and protectionism have all become a reality. Regulatory issues, coupled with unpredictable government behaviour, have caused a heightened feeling of uncertainty. For example, in China, regulation on the use of domestic credit insurance for financing has had a negative impact on the access to insurance-backed receivables finance. As companies strive for improved working capital, the demand for surety is increasing, with a growth in the awareness of the products benefits. The demand for both trade credit insurance and structured credit and political risk insurance is increasing. Looking forward, it will be important for insurer appetite to keep pace with clients changing business models and requirements. A multinational company with a decentralised credit risk management approach had a lack of visibility on their subsidiaries credit insurance procurement, and consequently, had no leverage of buying power. Client Situation Aons Approach We continued to place ongoing single risk transactions to ensure zero disruption to business. During this time, we collected and aggregated the current procurement across the global business. We reviewed and aligned all existing policies with a common renewal date, consistent scope of cover, and guaranteed price improvement. The next stage was an insurer tender to further optimise the structure, cost, and increase capacity. Impact and Value The client benefited from our analytics and insights, providing transparency, and knowledge about their secured and unsecured risk. They also enjoyed improved pricing and consistency of terms, while embedding their corporate credit risk management structure and process. Case Study Asia Loss Experience 2018 Flat 2019 Flat Asia Rate Movements2019 Asia Market Review 9Credit Solutions (continued) Predictions Digital will have a bigger impact on our industry. The digital economy continues to rapidly evolve, innovate, and disrupt. Fintech platforms are readily available, although there is work to be done to achieve critical mass. Huge data flows generated by accounts receivables provide a plethora of opportunity to the industry and clients to gain insight and knowledge required to drive new solutions. C-suite motivation for using credit, political risk insurance, and surety will grow as awareness of how insurance can improve working capital increases. The main emerging factors that could impact insurance capacity are trade tariffs, cost of capital, lack of up-to-date financial information on obligors, as well as our proximity to emerging markets driving insurance requirements in higher risk countries where there is limited capacity. Clients are seeking value for money, informed and consistent risk decisions, and a genuine intent by insurers to support them through different business cycles. Capacity, speed of response, understanding of their business, and staying relevant and knowledgeable will be key for insurers. The unpredictable government legislations in the U.S. could pose a major geopolitical and economic disruption in 2019. On account of intensifying competition and impetus on top-line growth, we can expect an overall increase in market capacity in 2019. Voice of the Insurer C-suite motivation for using credit, political risk insurance, and surety will grow as awareness of how insurance can improve working capital increases. 2019 Asia Market Review 10 Mahamoud Islam Senior Economist for Asia Euler Hermes “Asian pivots such as Bangladesh, Vietnam, Cambodia, and Laos should benefit the most from this global trade re-wiring. Even if it is unlikely that China will be replaced soon as the key supplier, we see new players emerging in the longer term, mainly in ASEAN: Malaysia, Thailand, and Indonesia.” Source: Press Release - Global trade in 2019: and the winners are