Excerpt from ICBA Advantage Issue 5 – Winter 2009/10Corine Troncy

Coface, based in Paris, France, with 130,000 clients worldwide and a direct presence in 67 countries, recently introduced its “New Deal” giving clients more flexibility in the managment of portfolios and increasing dialogue among risk underwriters and clients. Improved transparency allows Coface to show clients how the company monitors accounts, identifies portfolio quality, and helps Coface be extra agressive in underwriting clients’ limits. Corine Troncy is Global Sales & Business Development Director, Coface Holding.

Question: Since the credit crisis began in 2007, Coface has maintained excellent guarantees, totalling €364 billion mid-way through 2009. Coface also reports improvements to its risk profile. How do these measures benefit customers?  

Corine Troncy: From now on, Coface’s first priority is to enhance Transparency and Dialogue with clients and to better take into account the quality of customers’ portfolios according to a weighting based on our statistical studies. To this end, for all existing portfolios, Coface is introducing new concepts known collectively as the “New Deal”.

Within this approach, we produce and monitor a score (with the same scale and meaning worldwide) for each company we underwrite. These scores are split into three categories:

• Category 1: Low Risk -> Score 6 to 10 (this category accounts for 86% of our exposure)
• Category 2: Medium High Risk -> Score 4 & 5 (this category accounts for 13% of our exposure)
• Category 3: High Risk -> Score 0 to 3 (this category accounts for 1% of our exposure)

Then for each policy, we calculate a RWE, Risk Weighted Exposure, the sum of a clients’ credit limits weighted by category. Category 1 holds a ratio of 1:1. Category 2 has a ratio of 3:1. Category 3’s ratio is 9:1. From our experience a buyer in category 2 is three times more risky than a buyer in category 1 and should be therefore three times more expensive to insure.

The benefit for our clients is quite obvious: more flexibility in the management of their portfolios – “they pay for what they get”  – as well as an open dialogue between risk underwriters and clients. This transparency also allows us to show clients how we work, how we monitor and rectify whichever inconsistencies they might identify, something that was not possible in the past. It is also easier to identify the clients with a better portfolio quality and be extra aggressive in underwriting their limits.

Question: Please describe how Coface’s Transparency Charter is being reinforced with client companies (the suppliers)?

Corine Troncy: Through our qualitative surveys and after a year of turmoil, we now know our clients want more transparency and an improved partnership/relationship, and please note Coface was the first credit-insurer to give access to ratings to the concerned parties in November 2008, with a possibility to correct or complete internal information. This Transparency operation is a clear success. ...

For the full interview, please download ICBA Advantage newsletter – issue 5.

(Excerpt from ICBA Advantage - The newsletter for trade credit insurance solutions Issue 5 – Winter 2009/10. © 2009 International Credit Brokers Alliance (ICBA) www.icba-online.com. Company and product names are trademarks of their respective companies.)