Promoting Receivables Insurance – Interview with Mark Attley of Receivables Insurance Canada

I recently had a conversation with Mark Attley, President of the Receivables Insurance Association of Canada.  Mark started his career as a property casualty underwriter.  He was introduced to receivables insurance - also known as trade credit insurance - in 1994, and considers it an eureka moment as it was the first time he had been introduced to an insurance product with an actual tangible benefit, not one predicated on loss.  He was semi-retired in 2012 when he was approached with the idea to help launch Receivables Insurance Canada.

Trade Financing Matters:  Why was Receivables Insurance Canada formed?

Mark Attley: During the Parliamentary review of the Export Development Act in 2007-09 (occurs every 10 years) the Government of Canada became aware of the dominance of EDC in the Canadian Receivables Insurance Marketplace and how the ownership of EDC by the Government unfairly skewed that marketplace in more than one aspect. One of those aspects was that EDC had regular communication with the Government, while the other receivables insurance companies’ voices were never heard. As a result, the Government mandated the formation of the the Credit Insurance Advisory Group (CIAG) to help the Government understand how the receivables insurance market worked.

The CIAG included representatives of all of the receivables insurance underwriters in Canada (plus three significant brokers) and became the first forum in which all these parties met together. In a relatively short time it was recognized in these meetings that there were common concerns about the receivables insurance sector in Canada and action plans were designed to address these concerns. The Government became uncomfortable with using CIAG to carry out those action plans (not within the mandate of the CIAG) and this resulted in their suggesting that the plans be carried out by a separate organization. The goal was to make Canadian companies aware of receivables insurance and the trade opportunities it enhances or creates.  As a result of those discussions, it was decided to form an Industry association to educate the market around receivables insurance.

Trade Financing Matters:  Who is behind the creation of this new association?

Mark Attley: Founding members of the Receivables Insurance Association of Canada include “Group of Seven” underwriters, AIG Canada, Atradius Credit Insurance N.V., Coface, Euler Hermes Canada, Export Development Canada, Guarantee Company of North America and Red Rock Insurance Services Ltd. as well specialist brokers, including Aon Canada Inc., Marsh Canada Ltd. and Millennium CreditRisk Management Ltd.

Trade Financing Matters:  What is your goal?

Mark Attley: Our mandate is to double the size of the credit insurance market in Canada.  Less than 1% of Canadian companies currently utilize receivables insurance as part of their financial planning – or less than 10,000 of Canada’s 1.1 million employer businesses. That compares to market penetration rates of up to 30% in European countries with long trading traditions, and 15% in the U.S.   The perception is trade credit insurance is expensive.

Trade Financing Matters:  How big is the Market in Canada today for this insurance?

Mark Attley: In 2012, gross written premiums were $208M, including EDC. The industry's goal is to double that by 2017.  Right now the average policy premium is roughly $32,000.

Trade Financing Matters:  Doesn’t EDC have a big advantage over other Insurers who don’t have the backing of an AAA rated Government?

Mark Attley: EDC is certainly the dominant player in the Canadian market. EDC's greatest advantages are capacity and a well entrenched relationship with Canadian banks.  Significant progress has been made by the industry and the Group of Seven private insurers to work more closely with the banks to the extent that most banks now treat all receivables insurance policies equally. The policies are all written by investment grade underwriters.  Most banks have acknowledged they can extend the same margins on all of a client’s accounts receivable portfolio when any of the Group of Seven - which includes EDC - insures the portfolio.

Trade Financing Matters:  What are your unique challenges in Canada?

Mark Attley: Probably only about 50 brokers in Canada understand the receivables insurance market and probably only a dozen that are active.  This is a drop in the bucket when you look at the number of commercial brokers in Canada.  So the Receivables Insurance Canada team is trying to present the revenue opportunities to brokers.  We need to educate brokers to let their clients know that accounts receivable is their largest unprotected asset.

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