INTERVIEW FOR CORD MAGAZINE APRIL 2021.
DANILO ĆIRKOVIĆ, EXECUTIVE DIRECTOR FOR INSURANCE AND EXECUTIVE BOARD MEMBER AT THE SERBIAN EXPORT CREDIT AND INSURANCE AGENCY (AOFI)
Liquidity of Policyholders Preserved
“AOFI has been present on the Serbian market since 2006, as a pioneer in insuring receivables against the risk of payment defaults. It has been recognized since its establishment as an organization that masters new products, such as the insuring of receivables and factoring. And AOFI has maintained its leadership position, despite the competition.“
Recently, in cooperation with a commercial bank, we have developed a new product for insuring the export receivables of banks in Serbia that arise from banks’ factoring operations. We hope that we will thus be able to additionally help to ensure the liquidity of the Serbian economy – announces AOFI’s Danilo Ćirković in this interview for CorD Magazine.
Despite the competition in credit insurance market, AOFI is still keeping its leading position. Could you compare the global financial crisis that lasted from 2008 to 2010 with the current crisis caused by the COVID-19 pandemic?
Shifts in the prices of metals are often taken as an indicator of the state of the global economy, and today we have the opposite situation compared to 2008. During the global economic crisis, we saw a significant drop in the prices of base metals, while during the last year we have seen a great increase in the prices of metals like copper, steel and aluminum. And we estimate that this trend will last until the coming autumn at least. Another difference between the two crises is the movement in the value of stock exchange indices. The value of these indices was in a terrible decline in 2008, which is logical given that the former global crisis was caused by a crisis of financial markets, while stock market indices are reaching their maximums during today’s crisis.
The similarity between the two crises is their uncertainty, with regard to future developments in the world economy. This uncertainty does hit exporters in individual economies the most. The role of export credit agencies like AOFI is to support the liquidity of the export economy through so-called trade finance instruments, such as the credit insurance and factoring. That is why AOFI’s operations during both crises have been greatly exposured in terms of risks taken in the international trading of base metals.
Since the establishment, AOFI has been recognized as an institution which introduced new products in Serbia, such as credit insurance and factoring. How satisfied are you with AOFI’s results in the area of trade credit insurance in 2020, and – with the exception of the pandemic – what else marked your operations over the past year?
AOFI insured what is for now a record- breaking 824 million euros in the turnover of Serbian exporters in 90 countries on all continents in 2020. We paid claims in excess of 1.6 million euros buyers based on non- payments of customers in six countries, thus helping to preserve the liquidity of our policyholders, which is our obligation and mandate provided by the Law on AOFI.
The result is obviously good. What is even more important is that we contributed to the stable operations of our clients and we are being approached by an increasing number of new clients, on the recommendations of existing ones.
Apart from the pandemic, last year and the start of 2021 have been characterised by more attempts at fraudulent scams, or the theft of the identity of creditworthy companies that are overseas buyers of Serbian exporters. Given the frequency of this, AOFI has been dealing with this specific issue since the outbreak of the pandemic, and we regularly inform our clients about the ways these frauds are carried out, striving to act preventative to protect the interests of our clients.
Do you have anything new to offer the Serbian market as a response to the crisis and the Serbian export economy’s need to secure its claims and protect its liquidity?
Recently, in cooperation with a commercial bank, we have developed a new product for insuring the export receivables of banks in Serbia that arise from banks’ factoring operations. We hope that we will thus be able to additionally help to ensure the liquidity of the Serbian economy. Specifically, banks will offer domestic exporters with so-called non-recourse factoring. This means that domestic exporters will not have an obligation towards the banks that bought the receivables in the case of the non-collection of those receivables, given that they will be insured by AOFI. This product, which we consider attractive for banks, has been available to all banks operating in Serbia since mid-March of this year.
Despite the competition in credit insurance market, AOFI is still keeping its leading posi- tion. Could you compare the global financial crisis that lasted from 2008 to 2010 with the current crisis caused by the COVID-19 pandemic?
Shifts in the prices of metals are often taken as an indicator of the state of the global economy, and today we have the opposite situation compared to 2008. During the global economic crisis, we saw a significant drop in the prices of base metals, while during the last year we have seen a great increase in the prices of metals like copper, steel and
aluminium. And we estimate that this trend will last until the coming autumn at least. Another difference between the two cri- ses is the movement in the value of stock exchange indices. The value of these indices was in a terrible decline in 2008, which is logical given that the former global crisis was caused by a crisis of financial markets, while stock market indices are reaching their
maximums during today’s crisis.
The similarity between the two crises is their uncertainty, with regard to future develop- ments in the world economy. This uncertainty does hit exporters in individual economies the most. The role of export credit agencies like AOFI is to support the liquidity of the export economy through so-called trade finance instruments, such as the credit insurance and factoring. That is why AOFI’s operations during both crises have been greatly exposured in terms of risks taken in the international trading of base metals.
Since the establishment, AOFI has been recognized as an institution which introduced new products in Serbia, such as credit insur- ance and factoring. How satisfied are you with AOFI’s results in the area of trade credit insurance in 2020, and – with the exception of the pandemic – what else marked your operations over the past year?
AOFI insured what is for now a record- breaking 824 million euros in the turnover of Serbian exporters in 90 countries on all continents in 2020. We paid claims in excess of 1.6 million euros buyers based on non- payments of customers in six countries, thus helping to preserve the liquidity of our policyholders, which is our obligation and mandate provided by the Law on AOFI.
The result is obviously good. What is even more important is that we contributed to the stable operations of our clients and we are being approached by an increasing number of new clients, on the recommendations of existing ones.
Apart from the pandemic, last year and the start of 2021 have been characterised by more attempts at fraudulent scams, or the theft of the identity of creditworthy com- panies that are overseas buyers of Serbian exporters. Given the frequency of this, AOFI has been dealing with this specific issue since the outbreak of the pandemic, and we regularly inform our clients about the ways these frauds are carried out, striving to act preventative to protect the interests of our clients.
Do you have anything new to offer the Serbian market as a response to the crisis and the Serbian export economy’s need to secure its claims and protect its liquidity?
Recently, in cooperation with a commercial bank, we have developed a new product for insuring the export receyvebles of banks in Serbia that arise from banks’ factoring op- erations. We hope that we will thus be able to additionally help to ensure the liquidity of the Serbian economy. Specifically, banks will offer domestic exporters with so-called non-recourse factoring. This means that domestic exporters will not have an obli- gation towards the banks that bought the receivables in the case of the non-collection of those receivables, given that they will be insured by AOFI. This product, which we consider attractive for banks, has been available to all banks operating in Serbia since mid-March of this year.
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