The Mexican credit insurance market is set to grow between 30% and 50% over the next year, according to the country's two largest credit insurers, Euler Hermes and Atradius.
Although credit insurance has been available in the Mexican market for some 30 years, the real growth began in 2002. In 2004, premium income grew by 57% compared with 2003 to reach 262 million pesos ($24.3m), according to the insurance regulator. At end of 2004, five credit insurers were trading in Mexico, while France's Coface has been considering entering the market. The main buyers of credit cover in Mexico are the larger companies, by Mexican standards, of annual earnings between $250m and $300m. But credit insurance is also available to smaller companies with earnings between $5m and $10m. In 2005, 65% of credit cover was for domestic business while 35% was for export business. Credit insurers say that export credit insurance has picked up significantly in 2005. Euler Hermes and Atradius are now working with Mexican banks that are beginning to accept their credit insurance policies as collateral against loans. The companies think that this will spur further credit insurance demand among medium-sized Mexican companies, which have annual earnings between $50m and $150m.
But potential growth in the Mexican credit insurance market could be stalled over the coming year by political worries about the outcome of next year's presidential elections as business leaders remain wary about the leftist leanings of the front-running candidate, Mexico City's mayor Andrés Manuel López Obrador. The Mexican Banking Association chairman Marcos Martínez said that demand for loans to finance working capital for short-term sales remains buoyant. But there has been a drop-off in loan applications for long-term projects.
Credit insurers in Chile are also predicting double-digit demand growth this year. There are only three credit insurers in the Chilean market – Continental, Mapfre and Coface – but these expect growth between 15% and 17% on 2004 credit premium income of 11.9 billion pesos ($20.15m). As in Mexico, the principal buyers of credit cover have been large companies but now small- and medium-sized companies have started buying the cover, says Continental general manager, André Mendieta.