At TXF MENA, we shed light on the trends in claims and recoveries in the MENA region for 2020 and 2021; the impact of COVID-19 and its repercussions was unmistakable.
As expected, in 2020 there was a spike of claims starting from Q2 (on average +38% YoY) across the MENA region. In H1 2021, claims have been continually declining and remain steady for Q3 and beginning Q4.
A spike in credit insurance fraudulent claims has been noted, ranging from fictitious export transactions, to shipping unordered goods to unsuspecting importers. Although these are unprecedented times, the spike of credit insurance fraud is nothing new; we have seen such spikes in the past whenever economic or political disruptions occur.
We expect claims in 2022 to remain flat at (or slightly below) the levels we are seeing in H2 2021. This expectation is largely based on the impact we foresee from the supply chain disruption (associated with container shortages, increased freight costs, etc.).
That disruption is dampening demand. Naturally, demand for discretionary items is likely to be dampened most, and therefore the remaining unaffected demand is likely to be resilient. Provided that no new shocks or unpredictable events occur, very few (if any) defaults are likely to occur from the “resilient demand” that is currently driving international export finance.
