As is obligatory in all posts this year, I must acknowledge that 2020 has been a year of significant challenges and difficulties…. Except, it’s important to note that 2020 has actually, genuinely, truthfully been a really difficult year! Perhaps we are so used to the circumstances of living through a global pandemic, economic lockdown and all the disruptions both have brought to professional, home and social lives, that we are desensitised to this amazing fact!
So, actually, allow me to begin by acknowledging that, yes, 2020 has been a year of significant challenges and difficulties. In fact, it is important to say that people should be very proud of the work they have been able to get on with – not despite Covid19, but in the face of Covid19. For most, this has involved getting used to new schedules, new ways of working, and new technology. And that is before, we even think about the changes that the pandemic and resulting lockdowns have brought – both operational and strategic changes as supply and demand fluctuates widely in different sectors, but also regulatory and policy changes as governments have introduced measures to insulate economies from the worst of the disruption.
For ICISA members and the wider credit insurance and surety sector, the pandemic has brought its equal share of both types of changes. Operational and strategic changes as risks of non-performance, non-payment and insolvency increased substantially throughout the year; and, via governments and regulators as different measures and requirements were introduced to keep markets open. Of course, these regulatory and policy steps sit alongside many already existing developments which are underway or on the horizon.
For that reason, the timing was perfect to hold a series of webinars with colleagues from the Berne Union to discuss some of these major regulatory issues – both longer term developments, as well as newer and more immediate concerns. Wednesday, 9 December saw the last of three webinars jointly hosted by the Berne Union and ICISA on key regulatory topics facing members of both associations and the related sectors they operate in. Although both organisations have a different focus, many of the same issues impact members of each and it is always useful to understand and discuss the approaches taken by others on complicated matters.
Webinars, along with video meetings across the myriad platforms we are now all expert in (another not insignificant development in 2020), have become a core part of how businesses operate today. This and the wider development of more tech-enabled flexible working are surely some of the positive changes that have been made this year. The level of engagement seen from members of both associations across the three successive Wednesdays that our series of meetings were held demonstrates this well.
The first session, naturally, covered the elephant in the room – Covid19. Here we heard about the role that state-backed credit insurance guarantee arrangements have played, but also the challenges they have been placed on participating insurers from an administrative as well as commercial perspective. The discussion, featuring representatives from members of both the Berne Union and ICISA, also touched on the potentially delayed emergence of claims and the expectation that these are likely to arise in 2021 due to the effect of different measures to delay or minimise the immediate impact of the pandemic and lockdown on economies. Overall, this session also demonstrated the significant efforts of those in the sector to continue to deliver critical services to clients, and support the response and eventual recovery from the worst effects of the pandemic.
The second webinar featured two separate discussions on ongoing developments in Solvency II and Brexit – the issue that used to be the elephant in the room, but thanks to Covid19, has been downgraded to the bull in the china shop. Indeed, the pandemic has taken up so much effort from everyone this year, it is easy to forget that there are other major issues that businesses and individuals have been preparing for or responding to since well before Covid19 emerged. On Brexit in particular, significant changes will begin to bite in only a few weeks. However, the discussion, which included perspectives from both an underwriter and a broker, demonstrated that the many delays to Brexit since the initial referendum have enabled the industry to get as ready as possible for the changed circumstances they will face. The key message emerging being that although a nuisance, the sector is ready and business will continue.
Solvency II has also been a key topic this year given the EU’s ongoing review of the key directive and associated regulations governing insurance in Europe. So the session on the topic, which provided an overview of where we are and what is likely to come, was a very useful reminder of how we got here . Equally, as other regulators examine their regimes around the world, there are many lessons – both positive and negative – that can be learned from the experience in the EU.
Finally, the third session covered the major emerging topic of sustainability, as well as an overview of the key changes in banking regulation, which impact a core group of clients for both ICISA members and Berne Union members. On sustainability, it is clear that this topic needs to be given more attention by the sector and the session featuring experts from members of the Berne Union, ICISA, but also the banking and regulatory world, highlighted both the breadth of the subject, as well as the imperative we all face to get to grips with it.
The session on developments in banking (for different reasons) also highlighted a subject that members need to be considerate of. Banks remain a core customer group within the sector and understanding the rules that they face – particularly those dictating the value risk mitigating products like credit insurance have for banks – is crucial for credit insurers in particular. However, it is also an important topic for all ICISA members to engage with because the lesson of the response to the 2008/09 financial crisis is that rules for banks eventually lead towards rules for insurers. Indeed, we are already seeing the impact of this, for example, through a greater focus from key insurance regulators on enhanced recovery and resolution planning, amongst other things. So understanding how Basel III is adapted and adopted in different jurisdictions could well help indicate what direction insurance regulation will shortly follow.
The pandemic has brought ICISA and Berne Union members together in a number of scenarios, including the different roles each has where state credit insurance guarantees were introduced. However, collaborating through this webinar series emphasised the value of sharing information throughout the wider related industry we often occupy together. Indeed, one of the key lessons that has emerged from the pandemic – and which was highlighted during the webinar series – is how much our members and the members of the Berne Union care about the work they do, and getting it right for customers.
ICISA members are aware of the impact their products and services bring to clients every day. Our members are well-regulated and used to dealing with crises and responding appropriately to the challenges they face. That credit insurance and surety markets remain key tools in keeping economies running through the current difficult times is evidence of the significant value they bring – both in less and more challenging times. So, let’s acknowledge that, yes, this year has been difficult, but that we remain up to the challenge.
Author: Daniel de Búrca, Head of Public Affairs at ICISA