African Trade Insurance Agency (ATI) in conjunction with Atradius and Clarkson Notcutt Insurance Brokers facilitates first ever credit insurance cover to a Kenyan flower exporter
NAIROBI, Kenya, 28th January 2005
ATI, Africa's only multilateral Export Credit Agency, sometimes also known as an Export Guarantee Scheme, today announced the issuance of its first credit insurance policy to Redlands Roses Limited of Kenya, a major exporter of fresh flowers to European and Australian markets. The policy, which has been issued under ATI's partnership with Atradius, (formerly Gerling NCM, the world's second largest credit insurance group with premium income of well over US$ 1 billion), will secure Redlands Roses against the payment default of its buyers.
Ms. Isabelle Henin Spindler, the Managing of Director of Red Lands Roses said: "Credit insurance is a new insurance product in Kenya that is most welcome. This will help a lot not only in payment recovery from clients but also in examining the credit worthiness of potential clients before entering into conclusive business deals. It is a product that we have been looking for sometime to hedge against the business risk associated with export business. This credit insurance will help the company to venture into new niche markets without the risk of losing the payments. We see this as a window of opportunity for fresh produce exporters to expand their business and market horizons"
Credit insurance will assist flower exporters to explore a wider market of potential buyers beyond the flower auctions. Although the flower auction may be judged to present only a slight non-payment risk, the margins are very thin and a default could seriously threaten the future existence of an exporter. Flower exporters have been looking for markets that offer them a better return without the additional risk.
This particular insurance secures the seller against the risk of non-payment by the buyers and also provides continuous financial monitoring of the buyers throughout the year so that the exporter is fully aware if one of its buyers is deteriorating and therefore is able to take appropriate action, including ceasing shipments, where necessary, to protect the seller's own balance sheet.
Nyang'ate Makhulo, an underwriter in ATI said: "Typically some 40% of the net current assets of an average exporter's balance sheet consists of trade receivables, or, to put it another way, of sums due to it for sales it has made. The loss of even a part of this vital, unprotected component of a company's balance sheet can easily result in the exporter's own insolvency through absolutely no fault of its own. It is for this reason that this vibrant and often over confident sector of industry in East Africa has begun to realise the extent of risks it runs and the huge benefits of the service that the ATI Export Guarantee Scheme can provide to Kenya's export industry and to those of ATI's other member countries".
She continued: "The last few years have seen the insolvencies of a number of similar, major conglomerates internationally, such as K-Mart and Parmalat, to name but two, and Kenya and its neighbours are just as exposed to this risk as developed nations are. These were previously thought to be rock solid financial entities. History has shown that the belief that exports to developed nations, just because they may be richer economies than emerging markets, are somehow safer is a dangerous and false assumption."
She concluded: "ATI's Export Guarantee Scheme is a cheap and simple financial tool to protect against financial risk and brings with it the enormous benefit that it does not require an exporter to put up any other security to its financing bank, freeing up its borrowing facilities and its balance sheet to enable it to grow more safely and aggressively."
This policy was also issued in conjunction with a local broker, Clarkson Notcutt Insurance Brokers Limited. Mr. Sam Agutu the Managing Director of Clarkson Notcutt said "Credit insurance has been completely unavailable to those who need it in East Africa; primarily exporters. This deal marks a departure point for the counterparties in it and the East African market as a whole. Clarkson Notcutt is determined to ensure that the market is fully aware of this risk mitigation intervention. It is no longer sufficient to carry out traditional vetting of your principals in the developed world; K-Mart, Parmallat, Enron, Worldcom et al have taught us otherwise. By all means vet and refer to credit rating agency?and then insure! This joint initiative marks what will no doubt grow into the preferred way of doing business for the sector and Clarkson Notcutt as the preferred intermediary." Clarkson Notcutt one of the oldest insurance brokers in East Africa, recently relaunched operations in Uganda after a 20 year absence. Mr. Agutu further stated that the company was already taking the initiative to pioneer Credit Insurance in Uganda.
Note to Editors
Every company, from a small-sized to an international group of business, selling on open account, is eligible to subscribe to a credit insurance policy. According to the business and the trade sector in which the company operates, ATI can adapt the policy terms and create a tailor-made contract.
The credit insurance policy covers invoices against the risk of non-payment on both domestic and export markets and ATI in association with Atradius can offer cover in more than 180 countries worldwide.