Why banks insure structured commodity trade finance risk: evidence from a worldwide survey

Alexander Braun (), Marius Fischer () and Csilla Schreiber-Orosz ()
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Alexander Braun: University of St. Gallen
Marius Fischer: Independent Researcher
Csilla Schreiber-Orosz: University of St. Gallen

The Geneva Papers on Risk and Insurance - Issues and Practice, 2024, vol. 49, issue 3, No 6, 537-570

Abstract: Abstract We identify major drivers of the demand for credit insurance, using a worldwide survey among banking executives in the structured commodity trade finance business. Our results show that a bank’s propensity to purchase insurance increases in its experience and expertise with the product, the impact of insurance coverage on its balance sheet, the risk of the underlying transaction, as well as the intensity of broker relationships. Other factors, such as the size of the commodity trade finance portfolio, the competitiveness of the insurance price, and the risks arising from commodity price volatility, seem to be of lesser relevance.

Keywords: Structured commodity trade finance; Pre-export finance; Pre-payments; Borrowing base; Risk perception (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41288-023-00296-8

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