Navigating challenges, seizing opportunities

Camilo Rodriguez, head of international credit and surety at Axis Re, discusses the evolving landscape of credit and surety reinsurance.

Last year, you described it as a “time to shine” for credit and surety underwriters. How has the landscape evolved since then?

The "time to shine" sentiment still holds, accompanied by new challenges we must navigate. We've seen progress as inflation moves closer to central banks' targets. However, the monetary tightening used to control inflation has increased borrowing costs for companies, impacting their financial health.

In the credit sector, we’re seeing rising exposures, premiums and losses, with further insolvencies expected. In surety, inflation has required renegotiations on many projects.

In this complex landscape, our credit and surety solutions are even more crucial for supporting global economic growth and critical infrastructure investments. By collaborating with industry-leading clients and maintaining strong underwriting practices, we enhance financial stability and risk management across sectors, reinforcing the essential role of credit and surety in fostering economic resilience.

How have geopolitical tensions affected the credit and surety landscape, and how is Axis Re responding?

Our strategy is to collaborate with best-in-class underwriting teams globally, which has limited impact from these events so far. While our partners’ views frequently match the general market consensus, there are instances where our cedants, with their specialised knowledge, allow us to see beyond the headlines and identify areas of mutual opportunity to prudently take advantage of market anomalies.

Basel III represents a significant regulatory shift. How do you see it affecting the sector?

Basel III brings both challenges and opportunities for the credit and surety sector, depending on how regulators implement the rules. In the EU and UK, credit insurance is recognised as a risk mitigation tool, unlike in the US, where it has limited recognition.

If regulators in the EU and UK acknowledge the value of credit insurance, financial institutions could see significant advantages. However, if they assume less value, it could diminish the appeal of our product. The outcome will directly affect how much banks can leverage credit insurance to grow their business with our support.

Credit insurance has consistently proven to be an effective capital management tool for banks worldwide. We expect regulatory guidance soon, which will clarify the landscape for our industry.

Looking ahead, how is Axis Re positioned to capitalise on emerging trends in the credit and surety market?

At Axis Re, we’ve strategically positioned ourselves to capitalise on evolving market trends. A few years ago, we established the global credit unit as one of the three pillars of our reinsurance structure. This move has significantly enhanced our capabilities across all credit products and surety worldwide. By consolidating our expertise under unified leadership, we’ve created a more agile and responsive structure that better serves our clients and effectively navigates market changes.

We’re optimistic about the opportunities that Basel III implementation could bring, particularly in the US, while maintaining our strong position in the EU and UK. For the whole turnover credit space, we anticipate relative stability following recent growth. The surety sector also looks positive, with infrastructure investment remaining a key focus for governments globally.

As the market evolves and new entrants emerge, maintaining disciplined underwriting practices is more crucial than ever. This approach is not just about individual performance, but about ensuring the long-term health and sustainability of the entire sector. We remain committed to careful risk assessment and prudent underwriting, which we believe is essential for navigating the changing landscape and consistently providing value to our clients throughout the credit market cycle.