Global credit insurance increased credit risk of landslide

Global credit risk increased

International credit insurance and credit management services Coface has issued a new global credit risk rating report.

The report pointed out that as the global credit crisis worsening, in the first three quarters of this year, corporate debt index over the same period in 2007 increased by 36%. Britain, Ireland, Iceland, Italy and France have been Coface credit rating lowered.

Europe increased due to the growing financial crisis had caused a sudden tightening of bank credit, market, the impact of investor confidence, leading to a slowdown in economic activity, Coface in June 2007 and December will be included in the negative watch list of the United Kingdom and Ireland national trade risk should be downgraded to A2, Iceland's rating fell to A1 from A3, Italy, France has also been included in the negative watch list.

The report notes that the deteriorating economic conditions in Europe as a whole spread of the credit crunch than in the past every time a serious crisis, the credit crisis will continue for 18 months to 2 years, even if the global economy has entered a long period of stable growth in state enterprises Need time to adjust.

With the financial crisis in attendant is a marked deterioration in the credit risk.

In Britain, the bankrupt company a significant increase in the first half of 2008 reached 14%; Ireland's property crisis has spread to areas of the economy as a whole, and to bring about a recession, the company is in default in the first half of this year increased by 75%, and France's breach of contract over the amount of Last year, an increase of 75%.

"It is clear that with the financial crisis shifted to the real economy, credit insurance costs will increase." Coface general manager Xavier Denecker said.

Xavier Denecker in the UK and Ireland commented, "With the British and Irish economy into a recession, more and more executives recognize the credit risk, interest on credit insurance also increased, in difficult times, key enterprises will be a threat to the crisis Products and services to the financial position of suppliers, credit insurance is a reasonable cost will be substantial risk of loss from the transfer. "

In addition, the Coface report also noted that Hong Kong's open economy subject to global economic turmoil facing the same credit risk, and is expected to be local and deferred payment of arrears of cases will increase in Hong Kong were also included in the negative watch list.

"Recently, the South China region marked increase in number of business failures, many of these enterprises and the Hong Kong-related enterprises or enterprises to invest in Hong Kong, dragged down the Hong Kong-related enterprises; On the other hand, the economic slowdown in Europe and the United States has Hong Kong's exports of Europe and the United States, which is expected to A case in the next few months, continued. Toys, textiles / garments, jewelry and watches, furniture, printing and consumer electronics industries particularly affected. "Coface Greater China in charge of nuclear security and claims, Vice Managing Director Wani said that the country side.

ECIC's performance down

Credit crisis also face the risk of credit insurance.

Fitch Ratings pointed out that a few days ago, will remain on credit insurance companies care to the global financial turmoil could lead to more bankruptcy, and in turn affect the credit insurance underwriting result. As the credit insurance underwriting companies that trade receivables, which resulted in bankruptcy and corporate underwriting result of a high degree of correlation between.

Coface's global underwriting volume is also in September 2008 increased to 400,000,000,000 euros than in December 2007 increased by 230 million euros.

"The cooling of the global economy so that enterprises are facing a slowdown and profit from the bank to reduce the dual problem of funding, compared to the peak in 2007, credit insurance in 2008 net income will be reduced." Fitch's senior director of team security Marc -Philippe Juilliard said.

But in 2008 the estimated global number of bankrupt companies, credit insurance is not the decline in net income should be higher than in 2002. This should be attributed to lower the cost of credit insurance and the development of more sophisticated risk management tools.

In 2000-2007, the three largest credit insurance company reported net income of the worst performance in the 2001 financial crisis. In 2002, Atradius, Coface and Euler Hermes loss of 75,000,000 euros, 19,000,000 euros and 51,000,000 euros. In 2007, the three companies are the results: Atradius1.64 billion euros, Coface 164,000,000 euros and 407,000,000 euros Euler Hermes.

Fitch noted that the projected 2008 global enterprises will increase in bankruptcy: the world's Euler Hermes index is expected to bankruptcy, insolvency in 2008 will increase by 15%,

Before 2007 to 6% in some countries (such as the United States, Britain, Spain and Italy) and sectors (construction and retail) is expected to be even greater impact on some.