The sector has the responsibility to work together to keep goods and services flowing in the fight against COVID-19.
The COVID-19 pandemic has inflicted both high human and economic costs across the globe. Protecting human lives has required sweeping closures, and in some cases even mass lockdowns, to slow the spread of the virus. The necessary public health measures have caused national economies to feel the shocks from both the supply and demand perspectives, leading to significant reduction in overall trade. The resulting impact has quickly become a threat to the global economy.
In its role as a trade and investment facilitator, the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) is a firsthand witness to the pressure this crisis is putting on exporters and investors in member countries, particularly SMEs. The already harsh conditions for global trade can only be worsened when the export credit insurance market tightens. As private insurers reduce or pull credit limits, many credit insurance clients are left exposed.
As a risk-mitigation tool, credit insurance in itself is designed to manage risk and liquidity to facilitate and support trade through challenging environments. By maintaining and broadening the availability of credit insurance solutions, the system can avoid grinding to a halt and deterring unnecessary defaults due to short-term conditions. For this reason, there is a strong opportunity for government-backed and multilateral export credit and investment insurance providers, like ICIEC, to step up in supporting relief efforts during a crisis.
While the disruption to global trade and investment flows is unavoidable, the impact of the crisis need not be catastrophic. This once-in-a-generation crisis calls for insurance providers, both public and private, along with other partners with the mandate and means, to employ their resources to stabilise the trade ecosystem. Now, more than ever before, we should be leveraging our strengths by pulling together in solidarity to support countries and businesses through the crisis.
Relief efforts
As an immediate response, ICIEC has committed $150m, as part of the IsDB Group’s efforts to combat the pandemic, to facilitate trade in critical supplies. In addition, ICIEC has contributed to several strategic projects – including a EUR143m cover to the construction of two new hospitals and five new medical units in five existing hospitals in the West African Republic of Côte d’Ivoire. ICIEC also extended $2.3m in coverage toward purchasing state-of-the-art medical equipment for hospitals across Punjab province in Pakistan.
Even as we employ these immediate measures, we remain dedicated to our long-term priorities, including the advancement of Islamic finance within member countries and beyond. For more than two decades, ICIEC has been providing trade credit takaful services to support member country exports, and foreign investment takaful to support the inflow of foreign direct investment. Takaful has the potential to provide growth in untapped markets that show low insurance penetration. Since its inception, ICIEC has insured over $42bn through trade credit takaful. We believe this will be an even more important solution going forward as the hardest hit and most vulnerable economies begin to recover.
ICIEC encourages other insurance providers to do their part in providing short-term relief, while planning for economic recovery. Trade is the lifeblood of the global economy and insurance is a fundamental component of its healthy functioning. We have the opportunity, and responsibility, to work together to keep goods and services flowing – in particular, those that are essential to the fight against the COVID-19 pandemic. M