Seminar for the economic and commercial attachés of RBC 29.03.2007

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Seminar for the economic and commercial attachés of RBC 29.03.2007 Powered By Docstoc
					 ONDD-group

 from public to private
 from Belgian to global
 from monopolistic position to full competition




Yves Windelincx
CEO                        Conference on the future of credit insurance
y.windelincx@ondd.be                     Prague, 13 September 2007
    Content

    • Historical role of ONDD as export promotion instrument
    • Changing role of ONDD
    • ONDD as market player




Yves Windelincx                                                - 2-
Historical role of ONDD as
export promotion instrument      ONDD as export promotion instrument
Changing role of ONDD
ONDD as market player
                                 • What? Federal instrument of foreign trade with strong
   - strategic partnerships
                                   autonomy.
   - private corporation
   - widening access to credit   • Mission : supporting national companies in their
     insurance                     international trade business (mostly export
Conclusion                         transactions).
                                 • How to support : ONDD takes over some risks related
                                   to trade transactions.
                                 • Most important risks :
                                    – non payment risk on customer (= credit risk) →
                                      name credit insurance
                                    – non-transfer risk of payment made by customer




Yves Windelincx                                                                            - 3-
Historical role of ONDD as
export promotion instrument
Changing role of ONDD
                                 • Where?
ONDD as market player
   - strategic partnerships
                                   – mostly in developing countries (with lack of
                                     developed financial market).
   - private corporation
   - widening access to credit     – covering those trade transactions which are not
     insurance                       desired by the private credit insurance market
Conclusion                           (e.g. too long credit tenor, dimension of the
                                     transaction, quality of the import country).
                                   – consequently, the traditional role of ONDD was
                                     one of a credit insurer of last resort (when no one
                                     else is still prepared to take the risk).




Yves Windelincx                                                                            - 4-
Historical role of ONDD as
export promotion instrument      Changing role of ONDD
Changing role of ONDD
ONDD as market player            Traditional market of public export credit agencies is
   - strategic partnerships      shrinking.
   - private corporation
                                 Reasons for changes in the historical role and strategy
   - widening access to credit
     insurance
                                 of ONDD :
Conclusion
                                 • Structural change in the emerging markets leads to a
                                   decline role of ONDD and other public export credit
                                   agencies.

                                   Countries tend to graduate and perform better due to
                                   the efforts of the International Monetory Fund (IMF) to
                                   promote financial stability and broad-based economic
                                   growth.




Yves Windelincx                                                                              - 5-
Historical role of ONDD as
export promotion instrument
                                 • Restrictions imposed by European Commission and
Changing role of ONDD
                                   OECD to public export credit agencies with a view to
ONDD as market player
                                   avoid unfair competition with state aid to private
   - strategic partnerships
                                   sector.
   - private corporation
   - widening access to credit    As such, banning by European Commission of cover
     insurance
                                  provided by public credit insurers for marketable
Conclusion
                                  risks.

                                  Marketable risks : cover for ST standard trade
                                  transactions on EU/OECD countries forbidden for
                                  public export credit agencies.
                                  Restraining distortion of competition via subsidiation
                                  through export credit insurance (e.a. lower premiums,
                                  offering lower interest rates than market rates for
                                  export credits guaranteed by ONDD).

                                  Free market competition must prevail.

Yves Windelincx                                                                            - 6-
Historical role of ONDD as
export promotion instrument
Changing role of ONDD
                                 • Delocalization of manufacturing industry reducing the
ONDD as market player              volume of export transactions from Belgium.
   - strategic partnerships
   - private corporation          Less transactions to cover by ONDD.
   - widening access to credit
     insurance                   • Sourcing of projects
Conclusion                         Headquarters of multinationals decide on what
                                   transactions to be implemented by (Belgian)
                                   subsidiaries (decision making power out of hands of
                                   national corporations).
                                 • Increasing role of the private credit insurance sector
                                   Upgrading of emerging countries increases the area
                                   in which private insurers are now willing to take on
                                   risks in these markets – not only in EU and OECD
                                   countries, but in growing emerging markets as well.



Yves Windelincx                                                                             - 7-
Historical role of ONDD as
export promotion instrument
Changing role of ONDD
                                 Conclusion
ONDD as market player
   - strategic partnerships      • choice for public export credit agency is to remain
   - private corporation           insurer of last resort or to become a more global
   - widening access to credit     market player(1).
     insurance
Conclusion
                                 • insurer of last resort will have a marginal though well
                                   protected role to play
                                 or
                                 • insurer as global market player will continue to play
                                   its public role (export promotion), but conducting its
                                   business on the basis of commercial practices (free
                                   market principles) within the guidelines imposed by
                                   European Commission.
                                 • ONDD is evolving to the latter type.
                                 (1) See also paper R. Ascari, Is Export Credit Agency a misnomer?, Febr. 2007



Yves Windelincx                                                                                                  - 8-
Historical role of ONDD as
export promotion instrument      ONDD as market player
Changing role of ONDD
ONDD as market player            How to realize this private player approach?
   - strategic partnerships
                                 1. by seeking for international expansion via strategic
   - private corporation
                                    partnerships (= between ONDD and SACE)
   - widening access to credit
     insurance
Conclusion                       Pooling of :
                                 • data system / data transmission / technology
                                 • underwriting capacity

                                 Different forms of partnerships :
                                 • equity participations
                                 • cooperation agreements
                                 • representation agreements
Yves Windelincx                                                                            - 9-
Historical role of ONDD as
export promotion instrument      Equity participations
Changing role of ONDD
ONDD as market player            • Garant (50 %) Swiss/Austrian credit insurer
   - strategic partnerships         – reinsurance capacity
   - private corporation
                                    – representation
   - widening access to credit
     insurance                      – access to Russian market
Conclusion
                                 • TCRe (25 %)    Belgian credit insurer
                                    – enlargement of product (XOL policies)
                                 • KUP (66 % together with Sace BT)
                                    – take-over
                                    – public bidding
                                    → access to Central and Eastern Europe
                                    → this in the context of a global strategy of
                                      international expansion


Yves Windelincx                                                                     - 10 -
Historical role of ONDD as       International expansion
export promotion instrument
Changing role of ONDD            • KUP is the first common acquisition of
ONDD as market player              Ducroire | Delcredere plc and Sace BT.
   - strategic partnerships
   - private corporation
                                 • KUP is the first step on a new path that
                                   Ducroire | Delcredere plc and Sace BT have decided
   - widening access to credit
     insurance                     to explore together.
Conclusion
                                 • Aim : be present in major economic zones worldwide
                                   and where growth potential is possibly higher than in
                                   Europe.
                                 • Means : First steps together with Sace to share costs,
                                   increase databases, develop IT systems, enjoy
                                   synergies.
                                 • Philosophy : Attract other partners through a
                                   decentralized federative structure where each partner
                                   enjoys a certain autonomy and can be used as a
                                   platform for the larger region.

Yves Windelincx                                                                             - 11 -
Historical role of ONDD as
export promotion instrument
Changing role of ONDD
                                 Cooperation agreements
ONDD as market player
   - strategic partnerships      • Ingosstrakh            Russia           Reinsurance
   - private corporation
                                 • Sinosure               China            Reinsurance
   - widening access to credit
     insurance
                                 • ECGC                   India            Reinsurance
Conclusion
                                 • Aurea                  Brazil           Reinsurance
                                 • seeking for cooperation with other private and public
                                   credit insurers, e.g. in Turkey


                                 Representation agreement
                                 • UK (branch) – Andrew Strong



Yves Windelincx                                                                            - 12 -
Historical role of ONDD as
export promotion instrument
Changing role of ONDD
ONDD as market player
                                 2. by setting up a private corporation
   - strategic partnerships      • Ducroire | Delcredere plc (end 2004), disposing of free
   - private corporation           provision of services all over the European Union
   - widening access to credit
     insurance                   • cover of short term standard trade transactions in
Conclusion                         industrialized countries (EU + OECD) and emerging
                                   countries
                                    – consumption goods
                                    – commodities
                                    – semi-manufactured goods
                                    – equipment




Yves Windelincx                                                                              - 13 -
Historical role of ONDD as
export promotion instrument
Changing role of ONDD
                                 • Splitting-up of activities between ONDD &
ONDD as market player              Ducroire | Delcredere plc
   - strategic partnerships
                                    – Ducroire | Delcredere plc :
   - private corporation
   - widening access to credit         • ST standard trade transactions
     insurance
                                    – ONDD (public) :
Conclusion
                                       • Medium & long term trade transactions
                                       • ST special trade transactions (dredging works,
                                         infrastructure, …)
                                 • Evolution of insured amounts ONDD-group after
                                   creation private company (see next table)




Yves Windelincx                                                                           - 14 -
    Evolution of insured amounts ONDD-group (in millions EUR)

                           End 2003                End 2006                Growth    Share
                           (before setting up      (3 years after setting  (over 3   (% of 2006
                           private corporation)    up private corporation) years)    insured
                                                                                     amounts)
    ST business            5.510 (ONDD)            7.685 (Ducroire plc)    + 39 %      52 %
    Traditional business
    (MLT + special trade   1.223 (ONDD)            3.953 (ONDD)            + 223 %     27 %
    transactions)
    Market window           639 (ONDD)             3.026 (ONDD)            + 373 %     21 %
    TOTAL                  7.372 (ONDD)           14.664 (ONDD +           + 99 %     100 %
                                                          Ducroire plc)

    After setting up Ducroire | Delcredere plc, ONDD-group can present higher
    insured amounts for the different types of activities, including the traditional
    ONDD-activity rising to 27 % of insured amounts at end 2006 against 16 % only at
    end 2003.
Yves Windelincx                                                                                   - 15 -
Historical role of ONDD as
export promotion instrument
Changing role of ONDD
                                 3. by widening the access to credit insurance for more
ONDD as market player               corporations
   - strategic partnerships
   - private corporation         How?
   - widening access to credit
     insurance                   • lowering the national content requirement by
Conclusion
                                   accepting a higher degree of foreign deliveries /
                                   services in the transactions to be covered.
                                 • supporting the expansion of Belgian mother
                                   corporations by accepting cover for the export
                                   transactions of their subsidiaries abroad.
                                 • granting insurance capacity to multinationals of
                                   Belgian corporations in exchange for creating added
                                   value in Belgium by holding company (e.a. R&D,
                                   production, commercial activities, center of
                                   competence, …).


Yves Windelincx                                                                           - 16 -
Historical role of ONDD as
export promotion instrument
Changing role of ONDD
                                 • supporting deals of international project sponsors, in
ONDD as market player              return for creation of added value in Belgium (for
   - strategic partnerships        exemple the setting up of a Belgian subsidiary) or by
   - private corporation           insisting on a Belgian participation in the
   - widening access to credit     transactions to be covered.
     insurance
Conclusion
                                 • supporting market window activity
                                    – activity without Belgian interest, but at market
                                      conditions and reinsured by private reinsurers
                                    – especially unfunded risk participations in
                                      syndicated bank loans and participations in
                                      insurance syndicates for international trade-
                                      related transactions
                                  Now ONDD is showing more flexibility in taking
                                  transactions.


Yves Windelincx                                                                             - 17 -
Historical role of ONDD as       Conclusion
export promotion instrument
Changing role of ONDD            • Non-marketable trade transactions will always exist,
ONDD as market player              e.g. geo-political situation in the Middle East and Iran
   - strategic partnerships
                                   is important risk factor, refraining private credit
   - private corporation
                                   insurers from acting.
   - widening access to credit   • Hence, public ECA’s, like ONDD, have vital role to
     insurance
                                   play : supporting the Belgian companies in their
Conclusion
                                   international development.
                                 • Condition to this vital public role : maintaining a
                                   critical mass of business (no marginal activity).
                                 • Therefore, broadening the scope of activities by :
                                    – commercial approach, introduce market principles
                                    – concluding partnerships
                                    – greater flexibility on national content issues
                                    – developing the right set of new products
                                    – strengthening capital structure (see next chart)
Yves Windelincx                                                                               - 18 -
Historical role of ONDD as        ONDD is an autonomous public corporation not relying
export promotion instrument        on the state budget
Changing role of ONDD
ONDD as market player
   - strategic partnerships
   - private corporation
   - widening access to credit
     insurance                                                           125
                                                                   200
Conclusion
                                                            155
                                                      150




                                  To finance the further expansion of its activities and
                                   the strategic investment needs, ONDD has
                                   strenghtened its capital base via multiple capital
                                   increases, based on own financial means
Yves Windelincx                                                                             - 19 -
Thank you for your attention

				
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