Image of Meridian Finance Group – Q2 2022 Newsletter

Meridian Finance Group – Q2 2022 Newsletter

As I look back at my first few months as Managing Director of Meridian Finance Group, I’m extremely positive on the group’s outlook for 2022 and beyond, despite the negative macroeconomic and geopolitical events happening around us.

I have now been in Los Angeles for 5 months and would firstly like to say a huge thank you to all the Meridian staff for making me feel so welcomed. It is clear the team put servicing new and existing clients at the forefront of all daily activities and their knowledge and application of the various trade credit insurance product offerings are second to none. It has also been particularly pleasing to see the seamless integration with the wider Texel Group and continued work between the different global broking teams in US, London and Singapore – well done!

As a pre-COVID world attempts a return, I’m very encouraged to see the in-person meetings and conferences return to our calendars. The first quarter saw trips to clients and underwriters in several states including Texas, New York, Utah, Maryland and Georgia. Meridian brokers were also in attendance at the recent EXIM-hosted symposium, Export Essentials, where they were joined by EXIM President and Chair Reta Jo Lewis to discuss export tools for minority and women business owners.

Our partnerships with each trade credit insurer remain a key part of Meridian’s success and I have thoroughly enjoyed getting to know new underwriters as well as reacquainting myself with old friends in the market on this side of the Atlantic.

It is clear the potential for trade credit insurance use in the US is huge but penetration for the product needs to be improved. Whether it is mitigating credit exposures, securing financing or facilitating more competitive trade terms, Meridian must continue to ensure clients are serviced to the best standard possible and more people are educated on the correct and most effective way of using the product.

And finally, I would like to thank Gary Mendell for his invaluable guidance and advice during my initial months with Meridian. He has built a fantastic team and business which has created a very strong foundation to grow from. We wish him all the best in a well-deserved retirement and I’m sure he will remain close to Meridian and its employees.

  • Amynta Trade Credit & Political Risk Solutions has announced a strategic partnership with SCOR and entered the trade credit insurance market and will start writing business in Q2.
  • Tokio Marine HCC – Credit Group has appointed Michael Zheng as Lead Underwriter – Structured Credit
  • Rita Sukiasian has joined the Liberty Specialty Markets – Financial Risk Solutions team as Underwriting Officer
  • The Hartford – Credit & Political Risk Insurance has hired Senior Underwriter Osama Elshiekh
  • Evolution Credit Partners Management (“Evolution”) launched a new Trade Credit Protection program for high yield buyers with increased customization and flexibility
  • BondAval hires new Head of Credit, North America, Forrest McMillan
  • Ben Walker has joined FCIA as a Senior Underwriter
  • AIG has appointed Jay LeClaire as Head of Trade Credit, Northeast and Southeast Zones, based in New York.

Credit insurance has increasingly been used to cover companies performing a wide range of services for their clients, against payment default. The use of the term ‘services’ in this article encompasses a very wide range of industries with the defining characteristic that there is no tangible good being traded but a service of some variety being provided. In this article we’ll explore some of the nuances of covering payment default for services performed and where there are opportunities for clients and insurers.

The services sector was hit particularly hard over the last couple of years however we are starting to see a gradual global recovery. In the US alone, hotels, transport, communication, and services relating to broadcasting, some of the worst hit in 2021, have grown over 15% year-on-year (YoY) in H1 2021-22. Although there is cautious optimism for the services sector, we cannot ignore the current macro environment or forget the COVID driven impacts on domestic and service exports in 2020 and 2021.

The use of credit insurance for accounts receivables from services is growing but there is still a need to improve service providers understanding of the credit insurance product and how it can be used beyond solely mitigating non-payment risks. Similarly to credit insurance covering the sale of goods, for the services sector it can allow businesses to offer more attractive payment terms (e.g., net 60 instead of net 30) or to facilitate financing.

Services are intangible and there is no physical inventory to pledge as collateral but their receivables are no different to those from the sale of physical goods. Of course, services have certain differences compared to products which must be fully understood when placing credit insurance. Often it is required that services have been performed and accepted prior to invoicing or even customers are invoiced prior to any services being completed or even started.

According to the OECD, the US saw a 6.6% rise in services exports, with travel and transport up 39.4% and 11.3% respectively in Q4 2021. The US domestic services are witnessing similar growth with the US care services market alone valued at over USD 450 billion in 2021. These growth patterns have translated into more Meridian clients using credit insurance for accounts receivables from services and we expect this trend to continue in 2022 and beyond. Below are some examples of how diverse service receivables can be – and insurers appetite to insure them:

• Healthcare Staffing Services

• Satellite Geological Remote Sensing Services

• Facility Maintenance Services

Other key US domestic and foreign service sectors which we have seen trade credit insurance used for include transportation, utilities, financial services, food services, engineering and advertising.

Whether an insurer is underwriting the risk or a lender is considering them as part of a borrowing base, services receivables and product receivables should be treated no differently. Credit insurance policies can be tailored to suit the service providers requirements – in order to do so, it is essential all parties (client, insurer and broker) have a full understanding of the type of services to be performed and covered. Here are some important considerations:

– Are there special conditions in the contractual language?

– Is ‘slow-pay’ common for such services provided?

– How is it determined when services are rendered?

– When are the services invoiced?

– Does the insurance cover require an endorsement to cover specialized services?

Credit insurance protects services receivable from non-payment and can be written for the service provider directly or the lenders who finance such sales. Meridian expects the demand for credit insurance for services to increase in line with the wider services market recovery.

References:

U.S. Care Services Market Size & Analysis Report, 2030 (grandviewresearch.com)

International trade statistics: trends in fourth quarter 2021 – OECD

Founded in 2015, The Texel Foundation is the philanthropic arm of Meridian’s parent company The Texel Group, which supports initiatives promoting health, education, social mobility, and artistic opportunity. Each year, The Texel Group allocates a percentage of net profits to the Texel Foundation, which is then granted to partners operating in Africa, Asia, Europe, and the US. As the US representative of the foundation, I wanted to highlight two organizations we’ve supported so far this year.

In the wake of the recent mass shooting in Uvalde and scores of school shootings across the country over the past few decades, I feel it’s incredibly important to bring awareness to this first organization. Make Our Schools Safe (MOSS) is a non-profit dedicated to protecting children and teachers at school. One of MOSS’s main objectives is to get Alyssa’s Law passed across the country at state and federal levels. The law calls for the installation of silent panic alarms in schools that are directly linked to law enforcement in order to help get emergency personnel on the scene as quickly as possible. Through their advocacy, they’ve been able to get Alyssa’s Law passed in Florida and New Jersey with the legislation pending in Texas, Arizona, Nebraska, Virginia, and New York. This year’s Live for Alyssa event raised more than $125,000 to advocate for Alyssa’s law.

We also made a contribution to The Opportunity Network (OppNet) in New York. Their 6-year, multifaceted Fellows Program is designed to support and empower students through college and into their professional careers. Their program begins by preparing students for college through SAT prep courses, college tours, and college essay coaching. OppNet then provides support throughout the fellows’ college journey by working on good study habits, teaching them how to utilize campus resources, and offering paid summer internships. The final phase of the program helps the fellows by easing their transition into the workforce; teaching them key skills such as professional networking, salary negotiation, and even offers job search coaching.

OppNet also works through a program called Opportunity Ignited which focuses on diversity and inclusion. Opportunity Ignited partners with companies and through a series of surveys, culture mapping, trainings, and other exercises, helps build inclusive workplaces and matches employers with fellows from their program for summer internship positions and full-time jobs.

We are excited to support these causes again this year and look forward to seeing their crucial work continue in the future. Look out for updates in our future newsletters for more of our foundation activities here in the U.S.!

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