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Insurance

Mitigating risk for the UAE

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Banker Middle East sits down with Massimo Falcioni, CEO of Etihad Credit Insurance, to discuss the agency’s aims and goals a year after its launch.

Wednesday 07, August 2019

With an aim to drive export and import activity in the country, what does ECI have in the pipeline for 2020?

Etihad Credit Insurance’s (ECI) goal is to support $3 billion exports and re-exports of UAE-based non-oil companies by the end of 2019, in line with the UAE Vision 2021 agenda. We hope to achieve this by educating the market on how to use the guarantees, by partnering with all the Chambers of Commerce and Industry in the UAE as well as by partnering with the Ministry of Economy.

To date, we have already partnered with the Abu Dhabi Chamber of Commerce and Industry, Dubai Chamber of Commerce and Industry, RAK Chamber of Commerce and Industry, Fujairah Chamber of Commerce and Industry and Sharjah Chamber of Commerce and Industry.

have created workshops for members of these organisations to educate them on how to secure coverage from ECI. We are also in talks with, Ajman Chamber where we intend to start implementing these workshops to educate on the policies and guarantees to the members (UAE businesses).

What kind of challenges have you had to face thus far?

We have experienced a lot of interest. During our start-up phase, the first initiative that we put in place was the customer voice project. This was very crucial for the establishment of ECI.

We collaborated with the Chambers in Abu Dhabi, RAK, and Dubai, where the ECI team interacted with a diverse group consisting of 60 manufacturers, entrepreneurs, and exporters in order to understand their challenges.

The recommendations put forth by this group were further analysed and studied to identify the key areas of support. This categorisation put ECI on the right path to generate a suitable sample based on the ECI team’s interaction with another set of 80 entrepreneurs globally as well as by comparing the local and global scenarios.

The cumulative responses later helped us to gain a deeper understanding of the challenges faced by the exporters. We used this information to create customised solutions based on their prevailing requirements that ranged from accessing new markets, investing abroad, to protection from existing customers.

Furthermore, our objective was to make UAE start-ups aware of the challenges and opportunities in the export credit and trade insurance sectors. Thus, the National Accelerator Programme was formed to motivate and educate them. In January this year, we celebrated the successful completion of this training programme by certifying nine UAE Nationals and absorbing them into our organisation.

How did you address the aforementioned challenges and how do you see this developing going into 2019?

ECI has a clear-cut mandate in 2019: to be fully operational and to connect with various industries in the marketplace through interactive workshops, sessions, and educating the UAE businesses about ECI’s solutions to support their growth and expansion plans.

The year 2019 is predicted to be a challenging year for the global economy. In order to manage the risks of the insured UAE businesses, it is crucial to understand the nature of the challenges and risks.

ECI’s role is to mitigate the risks and stabilise the country’s development, especially the non-oil sectors by facilitating trade and investment, access to funding for local businesses thereby reducing the gaps in the marketplace. In short, ECI believes that a strong credit agency corresponds to a strong economy that in turn equates to a strong country.

 Where do you see opportunities for ECI to tap into?

The opportunities that we foresee for ECI is in tapping the existing gaps in insurance penetration in the marketplace. In terms of a specific sector, manufacturing is one of the least insured. ECI understands that the reason behind these gaps is a lack of understanding about the needs and requirements of the manufacturing sector.

Overall, there is a dearth of knowledge on the risk associated with trade and exports. This presents a great opportunity for ECI to generate confidence among the insured by protecting them against the risk associated while accelerating the development to increase the exporters’ turnover. Thus, contributing to a stable economic environment in the UAE.

What is the relationship between ECI and the banking system in the UAE?

Etihad Credit Insurance can be classified under the state guarantees and we endeavour to support local banks by offering guarantees that will ease the process of lending and avail access to funding, especially to the SME sector.

According to the advanced risk management measures methodology, banks can reduce their technical reserves by 20 per cent if they lend to their customers; provided this risk is mitigated by an insurer with a specific rating and policies that are not captive or owned by the bank. ECI and the banks are engaged in a close partnership.

We endeavour to support the banks in three categories, namely lowering trade receivables of the customer; protecting banks against their factoring solutions; helping banks while issuing surety bonding, performance bonds, etc. by issuing guarantees to the customer (UAE businesses).

This will encourage the banks to provide loans, which will be a great relief to the customers (UAE businesses).

To sum up, ECI is focused on supporting the steady development of the banking sector in the UAE, and they are dedicated to supporting local, conventional, international and Islamic banks under Shari’ah-compliant window of solutions offered through ECI.

Having operated for about a year, how far has ECI come in reaching its targets?

ECI has been ambitiously moving towards its mission of supporting and developing the UAE’s non-oil exports, trade, investments, and strategic sectors. Right from the inception in 2018, ECI has encouraged the UAE businesses to expand regionally or internationally and has built comprehensive platforms in various sectors across government, insurers, reinsurers, banks and lenders, regional and international export credit agencies, and trade promotion agencies.

In our first year of operations, we ensured completion of our structural set-up that began from hiring resources, setting up departments, process alignments, internal and external company’s procedures as well as outlining the solutions that will be catered by ECI.

By October last year, in a record time of 11 months, we officially launched Etihad Credit Insurance. Our first mission to Italy was spearheaded by the HE Eng. Sultan bin Saeed Al Mansoori, UAE Minister of Economy and Deputy Chairman of ECI that concluded with a successful partnership with SACE, the Italian Export Credit Company (CDP Group).

To strengthen our portfolio and boost cross-border investment opportunities, we further partnered with key export credit agencies such as the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), UK Export Finance and Export Credit Insurance Corporation (ECIC) and the South African Export Credit Agency.

Furthermore, to drive in more economic-trade activity and support local businesses to expand regionally and internationally, ECI joined hands with Chambers of Commerce in the UAE, including Abu Dhabi, Dubai, Fujairah, RAK, and Sharjah Chamber. Educational workshops and seminars on strategic support towards exports and re-exports were conducted at Abu Dhabi Chamber, Dubai Chamber, RAK Chamber, and Sharjah Chamber.

ECI went on broadening its portfolio by developing notable collaborations with First Abu Dhabi Bank (FAB), RAK Bank, Emirates Development Bank, Abu Dhabi Commercial Bank, Standard Chartered Bank, Emirates NBD and Natixis, in order to create seamless access of trade credit solutions and funding.

For mutual cooperation to design and deliver conventional and Shari’ah-compliant trade-credit insurance solutions and support the non-oil export trade, international entities such as the Arab Investment & Export Credit Guarantee Corporation (Dhaman) and Markel International and Jordan Loan Guarantee Corporation were initiated.

Broadening the landscape of partners to develop trust amongst the trade companies, we partnered with Berne Union and Aman Union to access the network of government-backed official export credit agencies.

ECI also awarded contracts to leading entities such as Tinubu Square, Fitch Solutions, EY and Coface to gain market intelligence and avail operational support for global trades. To conclude, ECI is considering various collaborations to continue to grow its network to provide the best of tailormade solutions thereby contribute to the sustainable growth and development of the UAE economy.

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