A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.- Mark Twain
Interesting article in today’s Financial Times on insurance companies entering the trade finance market.
The shift, which would be a first for the trade finance industry as a whole, comes at a time when new regulations arising from Basel III threaten to constrain the lending ability of banks, which have traditionally been the only source of trade finance. And with roughly USD 6.5 trillion in assets under management, the US insurance sector could become major players in the trade finance space.
As I mentioned last month, large banks will be going through many changes over the next couple of years, driven by both regulatory and economic considerations. Most will reduce their balance sheets and some will exit the Supply Chain Finance market altogether. Companies considering SCF solutions need to make sure their SCF technology platform can utilize multiple funding sources, both bank and non-bank. Insurance companies represent a source of inexpensive and relatively stable funding for SCF programs, a source that will become increasingly valuable.