Partner, not provider, key to credit and surety success: Koh

The Asia-Pacific credit and surety market has untapped potential, but unlocking it requires more than a capacity provider, Kathleen Koh of Peak Re told SIRC Today.

According to Koh, head of credit and bond at Peak Re, the credit and surety market in Asia-Pacific varies widely and is developing “unevenly”. Surety is well-established in countries such as Korea, Japan, and Singapore, while markets such as China (since 2016/17) and India (starting in 2022) are new. Trade credit penetration remains “relatively low” in Vietnam, Cambodia and Pakistan, while China is the largest market in Asia.

“There are pockets of opportunity in developing countries such as Indonesia, Malaysia, and the Philippines, fuelled by a rebound in tourism and a global supply chain restructuring. These countries benefit from their proximity to China, low labour costs, and a young, skilled workforce,” Koh observed, noting the potential these markets hold for growth.

Koh highlighted that China’s surety bond market has seen rapid growth, despite being new to the concept, which was introduced to the Chinese market only in 2016/17. Currently, there are more than 20 insurers competing in what Koh describes as a “highly competitive” space.

“In China, surety products have been performing pretty well with relatively low losses. But front-end acquisition costs are extremely high, which I think have to come down at some point for a healthier, more sustainable portfolio,” Koh said.

A long-term play

Globally, the surety bond market was estimated at around $15 to $33 billion in 2022, Koh explained, referencing multiple sources, with the US holding nearly 40 percent of the market. China represents a modest $320 million share, or about 2 percent of the global premium size. Koh believes there is considerable room for growth, but building scale will require patience, discipline, and a deep understanding of local dynamics.

“Credit and surety is a long-term play,” Koh noted. “We are now living in a highly interconnected world, which can be vulnerable to economic and geopolitical risks.”

This vulnerability, compounded by geopolitical tensions, supply chain disruptions, inflation, and rapid interest rate hikes, has strained businesses, impacting their operating costs and margins.

“Credit insurance products have proved their relevance to the global economic growth during both good times and bad,” Koh emphasised.

“I aim to be seen not just as a capacity provider, but as a committed partner.”

Reflecting on the past two economic cycles, Koh highlighted how the COVID-19 pandemic tested trade credit and surety resilience. “Credit and surety performed extremely well during COVID-19, even better than in pre-pandemic times,” she noted.

“Amid the current challenges such as rising political tension, I’m confident that with a well-structured product, disciplined underwriting, and robust risk management, credit and surety will still stay resilient and can continue to ride through economic cycles,” Koh said.

“Credit risk and exposure management require continuous and rigorous underwriting, along with ongoing review of the obligor, sector, country, and pricing adequacy,” she explained.

The Asia-Pacific credit and surety market has untapped potential, but unlocking it requires more than a capacity provider. “I aim to be seen not just as a capacity provider, but as a committed partner, offering robust technical support to grow alongside our clients,” Koh said, stressing the importance of true partnership with a reinsurer that understands the cyclical nature of this market.

She noted that while economic slowdowns may reduce risk appetite, they often spark awareness around credit insurance needs.

“Sometimes crises create opportunities,” she said. “They remind companies of the importance of protecting trade receivables. As re/insurers, we stay focused, preparing for worst-case scenarios to minimise or even mitigate unexpected claims.”

This cautious approach, Koh says, helps Peak Re adapt swiftly to new crises. “Credit insurance is robust and flexible, allowing us to reduce unused exposure when needed,” she noted.

Looking ahead, Koh believes digitisation and data will play an increasingly important role in credit and surety. “COVID-19 accelerated the push for digitisation and data collection, which I believe will remain a trend moving forward,” she said, adding that big data will be vital for future risk assessment and underwriting.

In terms of Peak Re’s strategic direction, expansion is on the cards but “won’t happen overnight”.

“We’re exploring opportunities in emerging Asian markets and looking at expanding into Latin America,” Koh revealed. "But we will invest time to study and understand these markets. It’s a long process involving close collaboration with local insurance companies and brokers,” she cautioned.

As 2025 approaches, Koh cited the upcoming January renewals as a “top priority” for Peak Re. “We aim to grow steadily, ensuring a strong bottom line through rigorous risk selection and capacity management,” she concluded.

Kathleen Koh is head of credit & bond at Peak Re. She can be contacted at: kathleen@peak-re.com

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