Navigating uncertainty with precision: how our underwriting process supports businesses

Businesses today are operating in an increasingly complex landscape. Macro- and microeconomic factors, from low economic growth to high interest rates and diminished household spending, are putting a strain on companies’ margins and pushing insolvencies up to pre-Covid levels.

In this context, a nuanced understanding of the risks and opportunities specific to each region, sector and client is vital. 

Underwriters have the responsibility of managing clients’ credit limit requests on buyers and monitoring their risk exposure. And our sectoral expertise is key to correctly assessing and evaluating this risk.

Take a market like France, with an economy that covers virtually everything – from construction to agriculture, tourism and everything in between. In a country so rich with resources, knowledge of specific sectors and of the interplay between them is indispensable. In France, our 52 underwriters are specialized in one of four trade sectors: construction; retail, agri-food and logistics; industry (from heavy industries to pharmaceuticals); and services, which covers tourism and hospitality, and IT services.

Now, let’s say we’re working with a client in the metalworks industry. Our client may know their own sector very well, but they come to us for an additional perspective. This could be on other industries that are part of their value chain, such as automotive, and on micro- and macro-economic trends. Our customers also turn to us for more information and benchmarking on the financial health of companies in their supply chain, or on the impact of commodity price variations that could affect them. With our sectoral expertise and granular view on our clients’ clients, we can grant the most efficient coverage so our clients can grow their business safely. There are several concrete benefits:

Different sectors of the economy face different risks due to factors such as market dynamics, regulatory environments and industry-specific challenges. By analyzing each sector individually, we can compare apples to apples when assessing credit limit requests. In other words, our underwriting criteria are tailored to each sector and supply chain’s unique risks.

Business relations can be complex if your buyer is on the other side of the world. Some sectors – such as agri-food – are organized very differently depending on the country, while others – such as automotive – are uniform around the world. At Allianz Trade, we collaborate with local underwriters around the world to get the best approach towards buyers and the geopolitical context. Then, we combine their sectoral input with ours to make the most informed decision. 

Fluctuating market conditions tend to affect all companies of a sector in the same way. By closely monitoring trends and developments within each sector, we gain valuable insights into emerging risks, market opportunities and competitive dynamics. This intelligence, developed with our economic insights team, informs our decisions and helps us stay ahead of the curve. 

Our risk grading process is organized by region: we have over 500 analysts across the world who reach out directly to companies, bankers and economic stakeholders to produce a comprehensive analysis of all our clients’ potential clients. Leveraging this information with our economic reports, our analysts provide a ‘risk grade’ for every company.

By combining it with our sectoral view in underwriting, we obtain a holistic assessment based on the individual company’s financial situation as well as the outlook of both the region and sector that they operate in. 

Underwriters don't just make decisions – we communicate, negotiate, and build relationships. When customers are in touch with our underwriters, they talk to someone who knows their sector inside-out. And these close relationships help us produce the data needed to better support our clients. Our ability to communicate becomes crucial when justifying coverage decisions to policyholders and brokers. Empathy also plays a pivotal role in understanding the needs and aspirations of both clients and prospects. 

Underwriting is about understanding the business ecosystem that impacts each client. It is with our targeted expertise and global reach that Allianz Trade builds trust, confidence and credibility with organizations around the world.