Exim reports insurance claims spike
Rising trade risk as buyers fail to pay
Export-Import Bank of Thailand says insurance claims soared 226% and foreign buyers' delayed payment amount surged 195% in the first five months of 2020, signalling rising default risk in international trade.
Exim Thailand's export insurance clients filed documents on foreign buyers' delayed payments for a total overdue amount of 617 million baht in the January-May period, said president Pisit Serewiwattana.
He said 24 clients filed for insurance claims amounting to 285 million baht, a 226% increase from 12 clients' claims amounting to 87.5 million baht a year earlier.
The vast majority of claims involve buyers' non-payment for goods (92%), followed by bankruptcy of buyers (8%), Mr Pisit said.
Countries topping the list in terms of insurance claim value are the United Arab Emirates, the US and France. The product types for which claims payments are the highest include rice, canned food, and gems and jewellery.
Exim Thailand predicts a 5-8% export decline in 2020. But there are opportunities in some goods, particularly food items and trending products such as work-from-home office equipment, medical devices, pharmaceuticals, electrical appliances and motorcycles.
According to Euler Hermes, a global trade credit insurance agency, the coronavirus crisis is predicted to aggravate global trade losses of US$3.5 trillion and spur a rise in global insolvencies of more than 20%.
Thai exporters will have to manage international trade risk by diversifying their export markets, focusing on promising markets with high purchasing power.
These new frontiers include Cambodia, Laos, Myanmar, Vietnam, South Asia and Africa.
Thai exporters, particularly SMEs that have low bargaining power and limited working capital, must manage non-payment risk. The pandemic could hinder overseas buyers from distributing their goods, causing delayed payments or payment defaults.
A survey on the short-term impact of the pandemic on businesses by Berne Union, a global association of export credit agencies (ECAs), in April showed that ECAs in the US and various countries in Europe and Asia have since February faced an upward trend of exporters' notification of their overseas buyers' overdue payments.
The trend carries the threat of buyers defaulting on payments for the third and fourth quarters, Berne Union said.
Exim Thailand has offered export credit insurance coverage of more than 1.37 trillion baht.