Tanya

Tanya

[00:00:00] Kingsly: Hi, and welcome to another edition of the cargo run podcast. My name is Kingsley and I'm your host since 2020, the world as a whole has gone through significant changes from the way we communicate, do business and even lead our lives. The pandemic has proven to us that perhaps we are not as strong and protected as we sometimes are to.

[00:00:24] Kingsly: With our current socio-political ramifications coming from the events between Russia and Ukraine, many countries on the African continent, particularly those who had, or still have trade relations with both countries are waking up to smell. The coffee promises will be broken. Debts will go on paid. So how can businesses protect themselves?

[00:00:48] Kingsly: How can they ensure that despite all the uncertainties, they can still trade with confidence. Today, we are joined by none other than Tanya maraca. Tanya is a tree credit insurance expert with nearly 20 years of underwriting and broking experience in the south African market. She started off working as a non-writer with credit guarantee insurance corporation of Africa.

[00:01:14] Kingsly: And currently she serves as a business development manager for marsh and McLennan companies. And Tanya is based in India. Tanya, thank you very much for making time to speak with us today. And without further ado, let's jump right straight into it. What is treat credit and what is treat credit insurance?

[00:01:38] Tanya: I can say thank you for having me and grafting to the listeners. This Kingsley, the world is definitely in a frenzy with trade sanctions. Being implemented. Shipment has become a costly emission with a huge impact on trade and Marine insurance. That's this trade Clift is a company's datas that are offered in terms with the promise to pay later, in order to facilitate trade by not utilizing all their capital.

[00:02:07] Tanya: The promise to play later allows them to utilize the capital at hand and to grow their business in the future. If a company had to pay immediately. They wouldn't be able to grow their business as their capital be under huge means pressure. What is trade credit? Insurance trade credit insurance protects a company's accounts receivable against the default from customer the insurer assesses all the company's datas and provides the policy holder with looking approval or rejection of cover.

[00:02:41] Tanya: Once the cover is in place, the policy holder is allowed to trade with the data. The claims triggers are split into two things. Commercial risk, which is non payment provided. There are no disputes business rescue and insolvency. The second one is political risk, which is a trigger, which is triggered by a country risk transfer issues, importation, conflict, and affiliation.

[00:03:09] Tanya: When did the Russia and Ukraine situation emerged and sanctions were putting. I will leave in shorter provided, or because clients exporting interaction with notification effective 25, February, 2020 at all, shipments prior to the 24th of February, would still be covered under the policy because of exporters not being allowed to ship to Russia.

[00:03:34] Tanya: Freaks produce has been flooded into other countries, causing the price to fall and a huge amount of wastage due to shipment, being diverted to other countries, it is placed credit limits and a huge pressure, even though some exporters are not trading with Russia, they shipments going into other countries has been affected by port congestion.

[00:03:57] Tanya: Do you manage costs and sold shortages of containers? Trade credit can help them. Alternative markets bias and alternative rockets are more well more likely to take on the products on a credit rather than on a cash.

[00:04:12] Kingsly: Thank you very much for that. Tanya. You touched on quite a few things and you've been in this industry clearly for a long time and you clearly know your way around it for some of our customers.

[00:04:22] Kingsly: Some of our audiences that are listening to us today, I'd just like to find out from you, what are some of the key considerations that accompany an international trader and I send me should consider or should have in mind when seeking trade credit or credit insurance,

[00:04:39] Tanya: Kingsley companies by trade credits for several reasons, I'm going to give you some key reasons why companies make use of the products benefits of using the product.

[00:04:49] Tanya: Then I will come back to your impression on what key considerations that company needs to have in mind before seeking trade credit insurance. Fantastic. So the key reasons why companies use the product growth into markets, the company has suffered a loss. This transfer. Corporate governance. Some companies don't get rid of Benjamin tools or get collection, and then others use it also as bank and financing requirements.

[00:05:18] Tanya: Now, some of the benefits of the products trade credit should be viewed as a sales tool for business expansion. Okay. It can assist with entries into new markets information on new buyers, new countries. It focuses on the credit worthiness of customers and countries. It allows companies to consider better terms for their estimates and can be a viable, alternative to letters of credit guarantees and other form of banking security.

[00:05:50] Tanya: It releases the customers capital and provides a competitive advantage. The second one is management control. Correct insurance assist the process of establishing limits monitoring payments in cash collections. Some issuers offer assistance with a collection of overdue accounts in datas, often pay the Patriots to uninsured datas to maintain a positive credit rating.

[00:06:20] Tanya: Okay. The third one is support to trade finance. Okay. It allows a company to grant credit terms on open account without any additional security. And it can be used as collateral as it raises finance. The policy can actually be seeded to the banks.

[00:06:38]

[00:06:45] Tanya: The last one is to protect your balance sheet three things about achieve protects current assets, Kevin in place loss provisions, corporate governance, and replaces unexpected furniture.

[00:06:59] Tanya: But I would like the listeners to know is the old traditional way of doing trade secrets. Insurance has changed before you had to offer your full this book for insurance. It's pretty to do a market on exercise, and it gives you a different perspective about you, others in the industry that you're trading a significant government is an uninsurable risk.

[00:07:22] Tanya: As we are able to Sue our own government, however, they insure us do undermined on some of the pedal staples exporting into other countries. Governance is an insurable transaction. You can exclude companies that are listed on the stock exchange. However, this means a higher rate as you. It means that you are taking out the positives.

[00:07:46] Tanya: You can also choose to select where you want to ensure. However you might select against yourself. And this also poses a higher level. On the policy. As most times, most people had over the hardest types of us there's currently one shorter that currently offers single data cover. However, the rate is extremely high as, as easily viewed as concentrated with.

[00:08:11] Tanya: It's just like to pay companies that make you subtractive to insurance, as they are aware of the material impact of cover being withdrawn due to slow payment or default, this makes it harder for them to further try to trade further. Data's end up looking for companies that don't make use of to insurance trade credits will always notify you or add this information on a data via a withdrawal or suspension of color.

[00:08:42] Tanya: They are however unable to disclose the reason due to the public.

[00:08:51] Kingsly: No, that is quite interesting. So they so if you take out insurance and your insurance company realizes that there is potentially a risk of non-payment or anything of a nature, they can withdraw the cover, but they are not obliged to tell you the reason we joined the cover is that, did I get that right?

[00:09:08] Kingsly: Yes.

[00:09:09] Tanya: Your honor will seem correct. They're not allowed to disclose because also they cannot disclose where they obtained that information from. And my last point that I wanted to touch on is that most companies that you know, that Donald's use trade secrets insurance, but they use bureau reports to assess their datas.

[00:09:26] Tanya: They're not a way that the losses that occur with all the insured us doesn't get communicated to the bureau. So you actually get a very skewed view. So when you actually assess that company's financials and their influence against yourself, they look very credible. However, you wouldn't know that they own it either.

[00:09:44] Tanya: They could be hundreds of exposure already held on that company. The big mission that, you know, CFOs, oh, punches as other products you'd be asking themselves is how are you protecting yourself against, a worse economic situation in your sector in South Africa, and the world.

[00:10:04] Kingsly: This is quite interesting.

[00:10:05] Kingsly: I think many of our listeners today, for those who are not familiar with Dre credit, or maybe have not taken out trade credit insurance, I think this is going to be very informative and telling to them as well. So you touched on a point which said that treat credit insurance is a viable, alternative to international letters of.

[00:10:24] Kingsly: Can you just speak a little bit more to that? For our clarity, please?

[00:10:29] Tanya: Yeah. So Kingsley, sometimes to put credits in place can be a costly exercise, right? And then if you don't also get your wording correct. And you're not using it, it's not supported by the correct bank.

[00:10:41] Tanya: It could pose a lot of challenges for you. However, if you get the policy in place, you weigh out the cost of a new top credit, in relation to what the insurance would cost. Most times there's a cost benefit on if you gain a lot of insight into what the data is, how they are assessed.

[00:10:58] Tanya: Plus you'll get early warnings also when there's, these just challenges.

[00:11:02] Kingsly: But how do insurance companies protect themselves today? How do they ensure that clients do not become insolvent? And perhaps aren't able to or , what are some of the mitigating steps that insurance companies may be taking today to protect themselves?

[00:11:19] Tanya: Okay. So Kinsey Tracleer insurance is built on trust with the policy holder and they insurance.

[00:11:25] Tanya: Okay. So some of the tips, mitigation, firstly, the policy holders notification. So the moment the policy owner is aware of a delay or defaulting payment. They are to make them shorter way provided that they obviously are in line with the policy notifications. Okay. And he's a timeline that says you don't want a case where you offered someone Betsy, they attempt and they just pay you one day late.

[00:11:49] Tanya: And all of a sudden you're handing over to their children. So the policy obviously caters for a certain period that you Adrianne to notify someone every time they, one day make you would actually, you wouldn't go strong relationship with your customer, right? You would actually tanish it and things. It wouldn't be good for business.

[00:12:05] Tanya: But in this case, all the charters, all that showed, just have a timeline of when you need to notify. And this is communicated by the PO the insurance policy wording. And by the broker, during your policy training, giving you a datas getting, policy, a policy, all that, she tried to get better.

[00:12:23] Tanya: It's also by trade credit insurance, because if their data's aren't insured and their data's don't pay them, you could place a lot of pressure on your trade receivables. They ensured us of constantly monitoring theirs. They update updated information is constantly being requested. Financials, bureau reports, and other sources of information, both formation of strong credit committees that are constantly evaluating the risks on key datas and hold huge exposures.

[00:12:54] Tanya: When it comes to reinsurance, some cuties at risk exposures need to be motivated to the new insurers. So a strong business case needs to be bolted onto around it and presented to the reinsurance. And the insurance will say, okay, we will decide to give you an additional capacity or you're not interested in taking further on in that sector.

[00:13:16] Tanya: The moment one, plus your oldest supplements and notification. With other policy chicks with other posts, your elders, if they experiencing the same problems, if a few from the cubbies would thrown in order to stop further tree and to mitigate the loss.

[00:13:33] Kingsly: I see. This is quite interesting. You did mention that insurance companies would tend to encourage them shirts to either, be swayed their customers to take out credit insurance as well.

[00:13:46] Kingsly: Do you find in your experience that this is is widely adopted in the industry? Is this something that the insurers are more likely to do? Are they more likely to truly only be those who also have drinker insurance on their side? Or what is it that you're seeing in the market today?

[00:14:02] Tanya: So there's a mix of both.

[00:14:03] Tanya: Okay. You use. If I will want to see all that. And I was setting to another data sometimes in that book, you'll find some of your dates is already by children's also. But then there's some that, you probably just say a mates, client, who they owns on this price. So they don't see the need of buying the full gates is upon us.

[00:14:22] Tanya: But if all of you, if the ones that are selling to on a bigger exposure and a lot of, a volumes of customers, it is good for corporate governance for them to do their people. The plus creates so much compliance where you, it's your checks and balances there to it, at the end of the period plus you have excess to Intel that you wouldn't normally get.

[00:14:42] Tanya: So you'd get an early warning, Atmos information, all those triggers that count, and you will still get your paid, your playmates. So it's one thing. Also, what you find is a lot of these companies that don't make use of the product, they buy beautiful reports and they use that as an assessment tool. The beautiful quote will say to you, yes, you can sell up to X amount, but when the loss occurs, you basically alone.

[00:15:05] Kingsly: I see. I see. So if you're a loneliness, when the loss of arises, then what is the point of buying this bureau reports?

[00:15:13] Tanya: It's, it's, two-fold, you've got to look at, a lot of customers use, P S vertical information on how they'd be able to get the buy-in.

[00:15:21] Tanya: Plus they use a little bit of that information, but I would say, for the little guys that can't afford affords by trickling insurance, at least have a really strong, good collector. So they could use that, you make too much to get some equivalences because for a smaller guy, one loss can actually wipe out.

[00:15:36] Kingsly: Tell me about it. I've seen quite a few particularly perishable traders on the African continent who have gone, bust because of problems like these. We have, many of our customers are trading, we're trading fresh produce into Europe. One of the big problems besides the quality of the cargo that they experience is that, the, they ship their goods, a lot of their, if not all, or their credit is tied into these containers as they reach new markets, when it gets to Europe and our school clothes buyer gets it.

[00:16:05] Kingsly: And then doesn't repeat them for the cost of the goods sold. So that has led to significant hardship to some of the customers that we have been talking to. And hence, the reason why we are talking today about triggering and triggering insurance. So Tanya, you did mention something about historical data, but in times like this.

[00:16:27] Kingsly: He's got these that does not tell you very much about, about a company's ability to repeat, how do or insights on their current practices, hope to give insurance assurance if at all, do you get any assurance from if you were to have a bird's eye view on the current practices of a particular company, would that help give assurance to either you as an insurance company or perhaps to an insured who is seeking to give a trade credit to a customer?

[00:16:54] Tanya: King's day, as I just noted incubation with me, information is constantly being updated. There is also other tools that can predict a probability of default using a company's financial statements and starting her losses and the industry of volatility. This forms part of the inference nine and a company's ability to make provision for banks.

[00:17:18] Tanya: Besides the data that is collected most insurance books, strong relationships with data's in order to gain huge insight into their practices. I think most times going to visit the company at their premises and having a face to face privatizations, opens up a different view and perspective these days, having access to teams and zoom has opened up opportunities, to engage more frequently with local and export images.

[00:17:46] Tanya: It's never, the data's never going to be perfect. But it's difficult in companies where there is no information, no financials have been done. With other ones you can use trading history, you can use, the several things that they can actually look into to be able to understand the business.

[00:18:02] Kingsly: Okay. Okay. So even in the perishable industry, which is one that is really, close to, to. There, there is a high frequency of quality related claims. So you have export as in South Africa who are shipping to Europe and every now and again, they reach out to us saying, my, my containers arrived with damage.

[00:18:23] Kingsly: There's been some quality related issues either. My customer is claiming that, because of this damage they'll need a 20%, 10% deduction, or perhaps there has been a significant delay in transit. The shelf life of my cargo has has been significantly reduced. So all of these things are these concerns for people like you in industry when you hear about these challenges that are currently going on in the perishable industry coupled with the low margins, does this impact on your appetite for the perishable industry in South Africa?

[00:19:00] Tanya: So things, firstly, but reference to a product quality is more in line with the Marine classical children's. If there is a quality dispute in order to have a valid claim with trade credit insurance, the dispute would need to be resolved prior to submitting the claim. However, there are ways that the insurance can assist if the dispute east Providence, there are ways to check that and no, it doesn't impact the appetite on the English to me, that's, it's, it would happen from one day to another in, in your industry, you have stone fruit season, you have such a season, they chilled it already is in line with knowing those different types of seasons.

[00:19:40] Tanya: And they know the appetite needs to be there. They know that insurance needs to back it, all these things have already been put in place. He started me over in.

[00:19:48] Kingsly: Thank you very much for that input. Tanya, so with what is going on now in Russia, many of our customers in South Africa and also outside South Africa who historically treated with Russia, they'll be looking to divert some of the car without was bound for Russia to other European countries.

[00:20:05] Kingsly: The result of this could be that, be an saturation or the market will be flooded with certain types of products. And the consequences of that will be, either lower margins maybe because the market is saturated, the buyers are in a stronger position to to demand better terms for themselves.

[00:20:23] Kingsly: Does this have any implication on, see, for example, a company's ability to renew their policy with you.

[00:20:37] Tanya: So some of these policies, it depends on which insurer you are with. They would have you, some are locked in for a 12 month period. Obviously the insurer has to assess the situation because obviously you bolting for a certain place, but now you unable to actually send those turnovers to certain countries.

[00:20:55] Tanya: One thing shorters do, can do these, stay close to the ground and listen to art for, which, there is a lot of data that saying that this food sold shortages in certain countries, they, there's a challenge, if they can actually open up a little more capacity in those industries, then you know, it could open up new markets for, for company, for the fresh industry to actually go into those differences.

[00:21:17] Tanya: The walls you show, what I found is, you've just gone through all that implementation of agriculture and all that. And growing those, the projects, and then you not going to have to almost sell your product next to nothing, because there's already 10 countries already shipping into that particular country.

[00:21:33] Tanya: So I think that just needs to happen a lot with foster, with everything that's going on. And also if you look at, sustainability and the ECG and all those, carbon emissions where they're trying to get all that. It's totally in line with these things. They just need to happen a lot more faster.

[00:21:49] Kingsly: Okay. As we come to the close or the end of our conversation with you today I'd just like you to leave our audience with one final comment. So many of our listeners are international treaters. Not the very big ones. I'd say a more mid tier and smaller medium-size enterprises. Any final thoughts for them as they're listening to you today as a triggering insurance expert, any final thoughts, any, anything to leave them, anything to give them a conflict in the periods which we find ourselves in the way.

[00:22:18] Tanya: I would say for the ones that hold policies are the ones who are looking to help others educate things, shoulders also, we buy a repeat, it's just, sitting in offices, we're not the ones on the ground. I think if and also come up with the, challenged him in different wording and things like that can be the stuff.

[00:22:34] Tanya: Instead of just, keeping things, the old traditional ways, business has changed so much. So it's also that the product needs to evolve also in line with the way trade is happening that they need to hang in there. Food is always going to be needed. And it's, if you see what the world's crazy green healthy it's, and it's very in line with your products.

[00:22:54] Tanya: So it's definitely higher on that list. It's just a case of, educates everyone out on it. Not only just your sick. So that everyone can catch up to you.

[00:23:04] Kingsly: Fantastic. There, you have it for those who tuned in to listen to us today. Thank you very much for spending your time with us. Our guest today has been Tanya, thank you very much, Daniel, for spending to today with us.

[00:23:15] Kingsly: And we look forward to having another session with you.

[00:23:20] Tanya: Thanks. Thinking it was not living here. Recording stopped.