Euro-zone crisis has exporters ducking for cover

PUBLISHED : Monday, 23 July, 2012, 12:00am
UPDATED : Monday, 23 July, 2012, 12:00am


It's not just the banks suffering in the euro-zone crisis - it has left a growing number of European firms unable to settle trades with Asian exporters, and credit insurers facing a sharp rise in claims caused by the defaults.

French firm Coface is one such insurer. Richard Burton, its Asia-Pacific chief executive, said claims on defaults last year from southern Europe - France, Italy, Spain, Portugal and Greece - were up 47 per cent from 2010. Coface offers credit insurance cover for exporters, reimbursing them if an overseas buyer fails to pay within a set period or goes bankrupt.

'The euro-zone crisis has led Coface to pay more claims last year. But it has also led more exporters in the Asia-Pacific region to buy cover against defaults,' Burton said.

Companies in the region now realised that regardless of how long they had known their business partners, there was still a risk of default in times of uncertainty, he said.

But the higher default rate had pushed up the cost of insurance cover for southern Europe to reflect the greater risk, he said.

The company's Asia-Pacific revenue has risen by between 11 and 20 per cent annually in recent years, and now accounts for some 8 per cent of the group's total revenue. The company, which entered the region in the mid-1990s, has its Asia headquarters in Hong Kong and operations in 11 markets including mainland China, Australia, Singapore and Malaysia. It has partnerships with local firms in the Philippines and Indonesia. 'I believe there's still lots of room for growth in the Asia-Pacific, which still lags Western markets in terms of credit insurance. Only a small percentage of Asian companies have credit insurance cover, while the percentage of companies in the Western markets which have purchased credit insurance cover is five times more than in Asia,' he said.

That was because many Asian firms trusted their long-term trading partners and did not believe they would default, he said, adding this attitude has changed in recent years.

Despite global uncertainty from the euro-zone crisis and a faltering US recovery, Burton expected global gross domestic product (GDP) to grow by 3.1 per cent in 2013, up from a 2.7 per cent forecast for this year.

While China, the world's second-largest economy, is being hit by the problems of Western buyers, he said the mainland could still notch up GDP growth of 8 per cent this year, compared with a modest 1.1 per cent in developed countries such as the United States, Europe and Japan.