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

Author

Listed:
  • Alexander Braun

    (University of St. Gallen)

  • Marius Fischer

    (Independent Researcher)

  • Csilla Schreiber-Orosz

    (University of St. Gallen)

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.

Suggested Citation

  • Alexander Braun & Marius Fischer & Csilla Schreiber-Orosz, 2024. "Why banks insure structured commodity trade finance risk: evidence from a worldwide survey," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 49(3), pages 537-570, July.
    • Handle: RePEc:pal:gpprii:v:49:y:2024:i:3:d:10.1057_s41288-023-00296-8
    DOI: 10.1057/s41288-023-00296-8
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