Credendo’s annual report: steadfast support to help companies confront the pandemic
- Despite the pandemic’s effects on the economy, Credendo’s insurance premium revenue remains strong at €334 million, an increase of 6,1%.
- In 2020, Credendo launched a new financial guarantee and a reinsurance programme on behalf of the State to support the Belgian economy during the Covid-19 pandemic.
- Our new, merged entity, Credendo – Guarantees & Speciality Risks, will help us become a bigger player in the surety market.
Unprecedented levels of uncertainty and support measures
After the first cases of Covid-19 were identified in China by the end of 2019, it didn’t take long for the virus to reach Europe and to start dominating our lives. The increased uncertainty caused by the pandemic, brought the credit insurance sector to the fore. As the official Belgian export credit agency, Credendo – Export Credit Agency launched a reinsurance programme on behalf of the State to support private credit insurers, and thus protect exporters’ limits.
Covid-19 impact on Credendo’s country risk classifications
Unsurprisingly, the year 2020 was marked by a wave of rating downgrades. The size of the shock varied among countries and regions. Those dependent on tourism – such as the Caribbean, Southern Europe and South East Asia – were hit particularly hard as well as countries relying on exports of oil and commodities. Countries with high debt and poor foreign exchange reserves also had a hard time rolling out support measures.
The global economy experienced a 3.3% contraction in 2020. This is clearly reflected in Credendo’s risk classifications. We downgraded 49 countries for the short-term (ST) political risk, while only three upgrades were recorded. Latin America (which saw 21 countries being downgraded) was the most impacted, followed by Asia (11 downgrades) and the Europe and CIS region (nine downgrades).
As for medium- to long-term (MLT) political risk, 16 countries were downgraded: six in Sub-Saharan Africa, four in the Middle East and North Africa region, and four in Latin America. Five countries had been upgraded before Covid-19 was declared a pandemic, four of them in the Europe and CIS region. The number of downgrades is relatively low, which is partly explained by the fact that, over the past few years, MLT political risk downgrades have largely exceeded upgrades.
2020 key figures
The insurance premium revenue remained strong at €334 million, which even means an increase of 6.1% over the previous year. This indicates that the pandemic has not affected our turnover. In terms of claims, our net loss ratio has increased to 72.5% from 41% the previous year. Whereas the losses didn’t reach the levels anticipated by the end of 2020, Credendo did close the year with a shortfall of €83 million, mainly due to the investment portfolio as a result of the financial market deterioration in the first half of 2020, and due to prudent provisioning in order to face potential claims due to risk deterioration.
The value of transactions insured slightly decreased, from €84.6 billion to €83.7 billion. “All in all – while the results are not favourable – it could have been much worse in the context of the global pandemic,” stated Dirk Terweduwe, Credendo’s Group Chief Executive Officer.
The geographical spread of the risk exposure over the various continents is as follows: European Union: 33.3%; Asia: 25.4%; Africa: 16.9%; other European countries: 13.1%; Central and South America: 7.7%; North America: 3.1%; Oceania: 0.4%.
Looking at the future
Looking ahead, our ambition is to keep growing. That’s why we started preparing the merger of our two specialised entities, Credendo – Excess & Surety and Credendo – Single Risk, in 2020. The merger became effective at the beginning of this month and has several advantages. “The new entity, Credendo – Guarantees & Speciality Risks, has an increased capital base and extensive network of branch offices in Europe. Those elements are key to our continued advancements, as we want to take a leading position in the speciality insurance market. Credendo – Guarantees & Speciality Risks will offer surety, excess-of-loss and top-up cover, and single-risk policies,” Dirk Terweduwe adds. “As a bigger player, we will be able to address the growing demand from large corporates and SMEs, as well as banks, and open up to new markets and clientele.”
S&P Global Ratings assigned the new entity an 'A-' rating with a stable outlook.
Growth is usually intertwined with innovation. Through our innovation vehicle, AREA42, we’ve been investing time and effort into finding solutions for digital B2B platforms, which are fairly new and unexplored within the credit insurance market.
Finally, 2021 is the year in which we celebrate our 100th anniversary as a public export credit agency. For that occasion, we designed and published an original comic book, and together with our annual report, we will release a book about the past 100 years. We hope that later this year, the situation will allow us to organise real-life events where we can finally meet our clients and partners again.
Group Deputy CEO
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