2019 Country Focus: Singapore
Acclaim is the largest Independent Insurance broker in Singapore. Established in 1983, we have today close to 70 team members. Our Trace Credit practice is only two years old, with three members who are all previously from MNC broking houses.
The team headed by Tony Lim, CEO of Acclaim, has two very experienced members, George Goh, Divisional Director, who has close to 40 years in the trade credit space. He was a credit professional at Dun & Bradstreet, financial institutions and commercial companies, and subsequently joined the insurance industry as a Trade Credit specialist for over two decades. He currently serves in the Singapore Association Of Credit Management – a credit professionals’ body as it’s Honorary President. Vonne Lu, Senior Manager, has ten years of experience in the trade credit space, was previously with a global credit insurer before joining a global broking house. Also, we have a Japanese desk with 2 Japanese team members to develop Japanese business, including Trade Credit Insurance.
Our goal is for Acclaim to be a major trade credit insurance broker in Singapore, and we will continue to invest to beef up our resources to this end. Within a short span of two years, we have been accredited by one of the world’s largest banking group as one of their approved trade credit insurance brokers. Apart from the traditional trade credit and surety insurance solutions, our core focus has been in structured credit and surety deals, which allows us to showcase a higher value in the solutions we bring to our clients.
Singapore economic overview
The economy continued growing at a lackluster pace in the third quarter of the year, matching the meager 0.1% year-on-year expansion recorded in the second quarter. A more severe contraction in the manufacturing sector, which remained under pressure from the global tech slump and the protracted trade conflict between the U.S. and China, continued to weigh on growth. Moreover, non-oil merchandise exports also dropped again in the period.
Meanwhile, private consumption likely cooled in the quarter too: Consumer loans dropped in the three months ending in September, while retail sales decreased in July–August. Meanwhile, data suggests the economy opened the final quarter on a weak footing. The manufacturing sector remained mired in contractionary territory in October despite a marginal uptick in the PMI, and the same was true for the vital electronics sector.
Next year, economic growth should firm up from an expected weak performance this year. A rebound in the external sector should revive manufacturing, while robust domestic demand amid a pick-up in investment expenditure should also buttress the economy.
However, the risk assessments are tilted to the downside as external headwinds from the Sino-American trade conflict cloud the outlook. Focus Economics panelists expect the economy to grow by 1.5% in 2020, which is down 0.1 percentage points from last month, and 2.2% in 2021.
Major Macroeconomic Indicators
Although employment data has remained healthy, according to a survey by Nielsen, consumer confidence among Singaporean dropped to a two year low in the third quarter of 2019 due to concerns over the economy and job security; a result of the drag on our export and economic numbers due to the tension between U.S. and China.
Singapore Credit & Surety Insurance Market
Typically, the insurance market is dominated by large players. Because insurance products generally are standard and can easily be replicated, competition is mainly down to price. Under this dynamic, larger, established companies in the market find it easier to maintain low prices while still make profits by spreading out costs over their customer base.
Thus, it is no surprise that the credit insurers are major players like Coface, Euler, Atradius, AIG, QBE, and Lloyds Asia. However, the surety market includes insurers who are not necessarily specialized in trade credit insurance.
The lackluster economic outlook generates an increased demand from businesses, but unfortunately, the same economic weakness also has a direct correlation with the weak financial positions of many buyers. As such, while there is an increased demand in trade credit insurance, insurers are very cautious in their underwriting, which makes it difficult for businesses to procure the cover required to secure funding. Therefore, this inability to obtain the necessary buyer limits also impacts, in turn, their sales volume.
On the flip side, the surety market is seeing brisk take-ups, and insurers are prepared to underwrite risks with decent collaterals and are giving banks a run for their money.