International Credit Brokers Alliance offers superior global and local service – ICBA is truly “glocal” in scale

By Rob Downey

"What's in a name? That which we call a rose, by any other name would smell as sweet; so Romeo would, were he not Romeo call'd, retain that dear perfection which he owes without that title." W. Shakespeare, Romeo & Juliet, (II,ii,1-2)

Maybe Juliet Capulet was right, but linguists tell us Shakespeare wrote his plays having at his disposal only half as many words as we have today. "Glocal" is a new word which can describe a seemingly familiar, but significantly different, view of international business. 

Global + local = glocal. What's in the word? Are you a global company or part of a "glocal" team?  Soon it may matter for you to know which. The meaning of "glocal" will likely merge with and then expand the meaning of "global". We will see if the new word endures, but it is useful to both myself and the International Credit Brokers Alliance today.

My view of a global credit insurance program is divergent from most brokers in the industry in that I do not consider a global trade support solution to be one merely in which a single insurer or a single policy covers the client's entire global receivables exposure. I prefer to have "global" in this context describe a type of solution – comprised of however many different insurers and policies – rather than a type of policy text. The solution is delivered in support of a global corporate management effort, coordinated with local operating units in various countries, and implemented with the support of an integrated worldwide network of local brokers. The ICBA describes such credit insurance programs as "glocal" to emphasize this meeting of global corporate awareness, efficiencies and perhaps even budgeting, with local or regional control, evaluation, language, law, text and tactics.

Whether the "glocal" insurance coverage is comprised of multiple stand-alone policies around the world or a significant portion of the risk is syndicated through one policy to many insurers, the broker support network for such solutions will perform better if it is "glocal" as well. A "glocal" broker team is licensed for local regulation and in tune with reigning customs, expectations, laws and policy types in various countries, but globally integrated and able to work together to find capacity and coverage terms anywhere in the world to suit the complexity of the client's receivables portfolio. 

ICBA brokers aim to place highly durable credit insurance, i.e., capacity that will withstand market downturns and significant claim activity, and to obtain the maximum amount of limit coverage available in the market at a reasonable cost. The opposing view, i.e., the notion that a single unified policy is best suited to most global coverage situations, is predicated on the old model – and ancient hope – that sales volume and spread of risk will help obtain the lowest possible premium rate and receive more "commercial mindedness" in underwriting decisions. Them days are gone or going fast. The pressures we see today are driving the idea of "glocal" capabilities to the fore:

• Companies have diversified business lines, and products spanning different sectors, countries and markets.
• Subsidiaries of one company may sell on an array of terms, to a wide or narrow base of buyers respectively, either on a one-off or recurring basis, for prices ranging from a dollar per widget to eight figures per project.
• Insurer risk appetites vary dramatically relative to industry sectors, countries or individual obligors.

Under one-policy coverage, the complications described above mean that some business units enjoy maximum cover tailored closely to their needs, while others experience the so-called unified global coverage, which is significantly deficient in approved limits, is unsuitably priced, or carries with it a uselessly high deductible.

And finally, there are two considerations relative to counterparty (insurer) risk with uni-policy solutions – both problematic. The first: for sellers who finance their receivables, concentrating coverage globally with one insurance company as a counter-party can be a problem if the insurer experiences financial difficulty. The second: a single-insurer program carries the risk that a financially troubled insurer will suddenly be inclined to reduce the risk it is willing to insure on individual limits or certain markets, as it works to improve its own balance sheet.

Think glocally; seek glocal solutions; work within glocal teams. "Glocalisation" (or glocalization) is spreading – I hope you did not hear it here first.

(Rob Downey is one of the founding partners of International Risk Consultants, Inc. (IRC) www.irc-group.com – a globally-integrated trade-finance and credit insurance specialty brokerage, which serves as the operating member of ICBA for Mexico, Brazil, India, China and the U.S.)