CRUZ GONZALEZ: Thank you.
BURKHARD WITTGEN: How are you today?
CRUZ GONZALEZ: Good. Very good. Happy to be here.
BURKHARD WITTGEN: I'm very excited to be here with you and discover how we can bridge our worlds together and benefit our clients.
CRUZ GONZALEZ: Likewise. So happy to be here, and discuss a little bit on what we see the future of our industries going for next year. So, Burkhard, what do you think are the biggest challenges facing our trade credit industry as of today?
BURKHARD WITTGEN: Well, I mean, talking about challenges is also, I think, very important to highlight that there are also many opportunities coming up So every challenge brings a new opportunity. So I think nowadays, looking at the risk environment our industry, the credit insurance industry is needed more than ever.
So I assume that your graphical changes, political changes, technology changes will disrupt global supply chains. There will be many winners, which adapt quickly to new developments. But of course, there will be also lots of losers and companies which are unable to adapt quickly enough.
And they might fail and therefore cause higher credit risk for our clients. So I think this is an opportunity because credit risk is increasing. But if our industry, on the other hand, is also adapting to all these new opportunities we have, it's something where we can evolve. Can make our product more attractive. Attracting more clients to come into our industry.
I think for us, it's now also time to bring the value of credit insurance to corporations which have not used our product so far. And here, I also like our campaign of bridging the gap between trade credit insurance and trade finance, because credit insurance can make your account receivables way more valuable. And then you can use it as collateralization and security to bring it into your finance discussions with your lenders or banks.
CRUZ GONZALEZ: Yep. So it can help you grow in the lending pool as well.
BURKHARD WITTGEN: Exactly So many clients or many corporates are seeing credit insurance from a risk mitigation perspective only.
CRUZ GONZALEZ: Mhm.
BURKHARD WITTGEN: So I can understand why many companies say, OK. We have decided not to go for credit insurance. But what if we bring the message to them that they can make more about their credit insurance policy than just navigating their own risk horizon. But using the higher quality account receivable pool to improve financing conditions, then we have a completely different discussion on C-level which will make our work even more valuable for our clients.
CRUZ GONZALEZ: Yeah. I agree. I think from my view as well, I think one of the key words you mentioned was uncertainty as well. So there's a higher risk that is developing in the market around regulation as well for lenders. So that does affect as to how they buy trade credit insurance or trade finance insurance as well as digitalization.
I mean, everything is adapting and changing so quickly, I think, in the last few years. It adds a lot of value proposition. It adds a lot of benefits in management and procedures. And it can help develop a lot of solutions, making everything a little bit more efficient and more streamlined.
But also it supports those that have been using the product for some time, maybe not well-known for those that are new joiners. So that's where our job starts. And we need to get them aware of what they can do and what they can benefit from if they bring the discussion around insurance sooner. When they start discussions with lenders and bring all of it together at one single place.
BURKHARD WITTGEN: Yeah. And I think one additional challenge is also-- maybe for the industry, using AI technology to make insurance more leaner. So compared with other insurance lines, it's a product which you don't just place, and then you take it out of the cupboard when you have a claim.
So you're working on a day-to-day basis. Asking for credit limits, reviewing credit limits, managing claims and so on. So additional to the premium insurance tax, of course, you have the internal operational costs coming on top. And I think this is a very high entry barrier for new clients.
Because if you haven't used credentials so far in the organization, then you put this new risk mitigation tool into the organization, you have to change processes. You have to train people. And especially for corporates, which might have, let's say, 40-50 subsidiaries across the globe, do you really want to make such a change process and bring such a change process into the organization?
By training several people to care about the product and keep it alive? Or is it more also our task as an industry to make credit insurance leaner, adapted to the credit worthiness of our clients? Taking their balance sheet strengths into account. Not wanting to insure every client. Not wanting to insure all the smaller buyers because all buyers you're insuring, you have to take care about the obligations.
CRUZ GONZALEZ: Yeah. Yeah.
BURKHARD WITTGEN: So we should think more about, how can the product be fit around the client structures, and especially for multinational corporations, covering catastrophic risk scenarios, but also making sure that leaner linear structures are then being enabled to bring it closer to the requirements of lenders and banks so that they can achieve capital relief. So I think making credit insurance lean again might be the things moving forward.
CRUZ GONZALEZ: Yeah. I think so. We do see a market trend as well from a lender perspective that is deriving a little bit from this. I think a lot of portfolio, a lot of trying to make thinner structures and management on procedures. So that gives you a benefit of economies of scale. And like you said, process-wise, it's something easier to manage. So criteria instead of having individual case-by-case limits. So I think the market is developing in that sense. And we're developing and creating products along the way with them.
BURKHARD WITTGEN: Yeah. And I think the credit insurance industry also besides having the risk capital on the one hand, on the other hand, they are sitting also on very valuable data. So payment behaviors across the globe--
CRUZ GONZALEZ: Historic information.
BURKHARD WITTGEN: --historic information. Something which is unique, and I don't think that many other industries have insights into that. So it's also a chance for our industry to become more seen and more appreciated by talking about also about data and analytics, and not just saying, OK. We want to insure everything. We could also provide data insights, and then we decide, OK. Which risk profile should be transferred to the insurer, and which risk profile does the corporate keeps in-house?
CRUZ GONZALEZ: Yeah. So it's a knowledge-based decision, and not just approaching everything to insure rather on specific data that has led you to that structure and that decision. I agree.
BURKHARD WITTGEN: Yeah. Where do you see areas of closer collaboration, and how could a closer collaboration lead to benefits for our clients?
CRUZ GONZALEZ: So I think bringing the discussion in sooner. I think discussing around insurance, utilizing the trade credit insurance that corporate clients might have at a sooner stage will help them also in the discussions with their lenders. So it is always beneficial that these discussions start from a sooner perspective, because you can make transactions into a bankable or fundable solution.
So I think bringing the discussion at the table sooner will help. From our point of view, it's also easier because we sit with teams that are heavily collaborative. And bringing together trade credit plus trade finance is offering that 360 service that we were discussing before. We're not finding just the right solution for one client, but we're trying to find the right solution that fits what they want to do with the product. It's not just a risk perspective, it's also what benefits you can get from the lending capacity or what benefits you need from a structure as well.
BURKHARD WITTGEN: Yeah.
CRUZ GONZALEZ: What do you think?
BURKHARD WITTGEN: I think it's an opportunity to bring credit insurance to a client base, which we have not unfolded yet. So as said, when credit managers decided to not buy credit insurance from a risk mitigation perspective, we might start having discussions with the C-level, CFOs. How can we help to let the company achieve better terms of financing.
CRUZ GONZALEZ: Yeah.
BURKHARD WITTGEN: Maybe wider opportunities, diversification in the financing mix. And what I also believe is that where you see how the political changes will come. So I assume that global supply chains will change tremendously, and therefore you need cash. Transformation is always expensive. And if you want to transform and when you want to go with the flow, then you need to, let's say, free cash flow and get as much financing as possible.
And I think trade finance supported by credit insurance is a massive opportunity to make our clients being able to have this transformation process achieved in a successful manner.
CRUZ GONZALEZ: Yeah. I agree because with a global structure like ours, you can always offer support from an overview of everything they put together. So if you bring their trade credit policies into a global view, then from a geographical point of view, you can service them in the right way as well. And bringing the discussions with the local banks from where they want to pull the cash from as well.
BURKHARD WITTGEN: Yeah. And I think it's also-- for the risk managers or insurance managers in corporations. I think there's always something that we are looking for. Appreciation within corporates, we improve the quality of securities and assets, which are taken into financing options. And this brings a way new light on insurance, because it's not just insuring against losses, it's enabling transformation and enabling further forms of financing.
CRUZ GONZALEZ: Yeah. Cost efficiency as well. So they're not just focusing on the risk, and that's a shift, I think, the market has been good at doing from specific corporates, maybe, that have been used to using insurance not just for the risk mitigation purposes, but definitely opens up a wider scope if we showcase the product as not just a risk efficient, but also supporting you within capacity and cash flowing as well.
BURKHARD WITTGEN: Yeah. Exciting times ahead.
CRUZ GONZALEZ: Yes. That's it.
BURKHARD WITTGEN: Having discussed the collaboration, how could this look like into more detail for the benefits of our clients?
CRUZ GONZALEZ: So I think, like we said, a lot of the structures or issues might arise when they start discussions with the lenders. So like we said, bringing the discussion sooner is something that helps because different structures will help solve for different problems. If we need to fix geographic locations, if we need to discuss around the insurer rating, which might be necessary for a specific lender. It can also fix issues around concentration risk or utilization from the corporate perspective.
And that can help fix pricing. So I think all of these solutions are achievable. And these are all things we've done through different structures and placements. But the sooner we collaborate and bring it together, then the sooner the corporate client will have a benefit and the lender as well.
BURKHARD WITTGEN: Yeah. I agree.
CRUZ GONZALEZ: Where do you see the future of our industry going?
BURKHARD WITTGEN: Well, I mean, it's always nice to look into the future and provide some predictions. Of course, there will be no answer, which one solution fits all. But as mentioned, I think that our industry will go into a more leaner organization. So credit insurance must be leaner, especially for multinational corporations.
It must be more adapted to the creditworthiness and the balance sheet strength. I believe that, of course, local service in each country might be a solution, but I also see that clients are taking away credit management tasks or let's say, handling of credit obligations or credit insurance obligations, and put them into shared service centers.
Having shared service centers means efficiency on the client side. Smaller team, a well-trained team on a specific task takes over the obligation. The failure of compliance or the risk of failure of compliance is reduced. And you also reduce the operational costs in handling the insurance program.
Then, of course, when clients think about how can they consolidate the handling of the insurance policies, they might think, do we really need a local policy everywhere? Or maybe we should consolidate more on a regional level or even on a global level, which allows them to take more risk. And self-attention aggregate first losses.
The more you consolidate, the more you can have a risk share and taking more on your own balance sheet, which of course, then leads to cost efficiency on premium rise. The more risk you take, the less premium you pay. But also administration-wise, the less you insure, the less obligations you have to fulfill.
And also I think when you look in the future and all the things happening around AI, I think I'm a strong believer in AI-trained bots. So AI agents or how they call it, where specific trained AI bots are fulfilling certain tasks. And there will be way more opportunities to make this process more efficient and also communication among insurers and the insured clients become more efficient.
And therefore, the more efficient you build this process, the more valuable credit insurance will be because you have a compliant process. You know when there is a claim, you probably will get indemnified, you won't have a failure in your own processes. And when you have this quality, also banks and lenders will recognize it because they will achieve, let's say, a higher form of capital relief.
So yeah. I mean it's an exciting times ahead. So we should be open for change. We should be open for new technologies. We should adapt them. And yeah. Then looking forward to the next 100 years in the industry. So how do you see, especially trade finance focus? How do you see the industry evolving, and what are your views on the changes, which will come also to the credit insurance industry?
CRUZ GONZALEZ: Yeah. So from my side, first of all, I agree, even a little bit scared with the tech developments and innovation, because a lot of things are happening, but looking forward to see what comes our way. I think another key focus we discussed already a little bit on portfolio structures and efficiencies. Like you said, economies of scale, I agree with that completely.
From a lender's perspective, overall, that makes a lot of sense. A lot of them are centralizing distribution discussions, and just want to build on that relationship and actually leverage that the use of the insurance is helpful in many ways, be it because of capital efficiencies or because of limit capacity constraints. And a lot of that continues to be true just with a more focus on portfolios to reduce a little bit of that operational risk and operational management.
I also think a lot of what we're seeing now is with the clear ESG focus. A lot of our clients, both corporates and lenders, are asking for ESG-integrated solutions. And it's super exciting to see what knowledge we have within our specialist teams. We're working on quite a few projects, both for lenders and corporate clients, that are evolving around ESG structures. Carbon credits. So we're doing some shipping structures around ESG regulation for vessels.
We're doing some things around a lenders structure where they are offering capacity based on a carbon offset project, and we're covering both the non-payment as well as the non-delivery. So it's great to see that insurers are advancing in this space as well, because if we look back a few years ago, we could cover credit insurance easily.
So maybe non-payment was already there, but inefficiency or non-delivery from a carbon offtake project was something we haven't heard about until fairly recently. So it's great to see there's a lot happening, and looking forward to see what else comes our way.
BURKHARD WITTGEN: Thanks, Cruz for your time. I think we brought some interesting points on the table. I think or I hope that you have enjoyed the conversation. So speak to you soon and have a great day.
CRUZ GONZALEZ: Likewise. Yeah. And for our listeners, if you have any questions, please don't doubt and just reach out to us, and we would be happy to discuss with you.
BURKHARD WITTGEN: OK. Perfect. Thank you.
CRUZ GONZALEZ: Thank you.
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