Management Report

Financial year 2022

SERV issued new insurance policies worth CHF 3.296 billion for Swiss exporters in the 2022 financial year. Premium income amounted to CHF 156.1 million and new insurance commitments in principle totalled CHF 1.434 billion.

“The Switzerland Infrastructure team offers us a good instrument to market the expertise of Swiss industry in buyers’ markets and the attractive financing options that SERV cover can open up.”

LARS pONTERLITSCHEK

Chief Insurance Officer

Marketing & acquisition

SERV expanded its acquisition team by two positions in 2022, thus further advancing its Pathfinding Initiative. By actively marketing in buyers’ markets, it gives Swiss exporters access to major international projects, particularly those in the infrastructure sector. In collaboration with SECO, Switzerland Global Enterprise (S-GE), Swissmem and Swissrail, SERV forms part of the international “Team Switzerland Infrastructure”, which jointly markets the Swiss industry’s expertise in infrastructure projects in buyers’ markets and the attractive financing opportunities opened up by SERV cover. The team’s activities during the year included accompanying Federal Councillor Parmelin on a visit to India in October 2022.

SERV insured three projects via the Pathfinding Initiative in 2022. To date, 30 exporters have benefited from subcontracts totalling CHF 175.0 million. Several new projects are already in the pipeline for 2023. In addition, S-GE has brought in infrastructure experts as part of the federal government’s “Access to major infrastructure projects for Swiss SMEs” initiative. These experts identify interesting infrastructure projects for Swiss suppliers in the six focus countries of Brazil, India, Indonesia, South Africa, the United Arab Emirates and the USA. SERV therefore expects demand to increase in the coming years.

An important building block for Swiss suppliers’ access to infrastructure projects is attracting general contractors (EPC) to Switzerland. SERV is currently in regular contact with 14 EPCs for the purposes of implementing infrastructure projects. All in all, SERV considers itself to be well on the way to achieving its desired transformation into a trade facilitator.

Development of new exposure and new commitment

SERV approved 701 new applications in 2022, of which 582 were insurance policies (IPs) and 119 insurance commitments in principle (ICPs). The value of those 701 applications is significantly below the figures achieved in the past, although it should be noted that there is a tendency to bundle subcontracts. This means that SERV theoretically has a single policyholder, for example an EPC or a packager, as a customer. In reality, however, this single customer combines a large number of smaller subcontractors into one single transaction under its contract. New commitments rose by 71 per cent to CHF 3.296 billion. As ever, the volumes of insured transactions ranged widely, between CHF 16,547 and CHF 390.0 million. As is customary, the majority of transactions insured by SERV were for SMEs, which received around three-quarters of the IPs. However, the five largest individual commitments alone account for almost 40 per cent of the total new commitment. The most important destination countries for insured exports were Türkiye, Uzbekistan and the United Kingdom (major project with guarantors from Luxembourg). In contrast to previous years, two-thirds of the new exposure was accounted for by credit transactions with terms of more than two years due to the comparatively large number of buyer credit insurance policies issued.

From 2017 to 2021, the demand for working capital insurance and counter guarantees declined continuously in terms of both numbers and exposure. In 2022, demand for these products by exporters increased again, with the number of working capital insurance policies issued rising from 39 to 47. There was also an increase in the number of counter guarantees issued, with these rising from 143 to 159. All in all, new commitment from these products increased by CHF 123.1 million to CHF 591.7 million.

The volume of newly issued ICPs fell to CHF 1.434 billion in 2022. A notable feature was that many ICPs were issued for business on the African continent, for example for Algeria, Cameroon, Egypt, Nigeria, Senegal, Tanzania and Togo.

Exposure & commitment

SERV’s exposure amounted to CHF 10.174 billion as at 31 December 2022, CHF 250.5 million higher than on the previous year’s balance sheet date. The commitment on the balance sheet date was CHF 8.315 billion, which was CHF 1.226 billion higher than on the same date the previous year. The increase in exposure resulted from the new IPs.

The change in the current exposure portfolio is not solely due to the volume of new business. It is typically influenced by the writing-off of expired IPs, the repayment of insured export credits, and the liability period and exchange rate changes of the insured transactions.

As in previous years, SERV’s highest exposure by country was to Türkiye, at CHF 1.285 billion. Uzbekistan has moved up to third place in the country list by commitment, as a number of projects in the textile sector have been insured here in recent years. A further addition in 2022 was the Pathfinding project in the tourism sector, which is presented on page 25 (cf. In the field, New sales market for Swiss SMEs in Uzbekistan). Exposure to Russia has been declining for years and since the introduction of the sanctions adopted in 2022, SERV is no longer allowed to insure any new projects in the country, with very few exceptions.

National and international environment

SERV again played an active part in the meetings of the Berne Union during the year. The priorities included the impact of the war in Ukraine and the COVID-19 pandemic on business activity, the opportunities and risks of the increasingly important African market, and climate policy.

In addition to multilateral cooperation, SERV attaches great importance to maintaining and strengthening its bilateral relationships. It therefore maintains regular exchanges with other ECAs.

OECD country risk categories

As at 31 December 2022

Losses and claims

In recovery, 217 claims in a total of 38 countries were processed. Recovery is often a challenging, protracted process that depends to a great extent on the country and on the debtor’s willingness or ability to pay. Initiation of legal action in the debtor country concerned does, however, give rise to some successes. Support from political actors such as embassies can also have a very positive effect on recovery in individual cases. The largest recoveries in the year under review came from the United Arab Emirates at CHF 6.4 million, from Congo-Brazzaville at CHF 2.1 million and from Switzerland at CHF 0.7 million.

Restructuring & debt rescheduling

The international agreement on a Debt Service Suspension Initiative (DSSI) for the poorest countries, reached in 2020 as a result of the COVID-19 crisis, also impacts on the 2022 financial year: of the countries that have active debt rescheduling agreements with Switzerland, agreements under the DSSI were agreed with Cameroon and Pakistan to defer the 2020 maturities until the end of 2021. Repayments have been taking place since mid-2022.

Negotiations also took place with and Argentina and Cuba in 2022. No significant progress was made with Cuba; negotiations will continue in 2023. At the end of October 2022, the Paris Club creditors, including Switzerland, managed to reach a new arrangement with Argentina on the current debt rescheduling, comprising semi-annual instalments with a repayment period of six years until September 2028. The bilateral agreement with Argentina is expected to be signed in Q1 2023. The first repayment was made in December 2022.

The G20, the countries belonging to the Paris Club and other creditor countries agreed on a Common Framework for Debt Treatments beyond the DSSI (“Common Framework”) in November 2020. The aim of this framework is to find solutions for countries that require support beyond that of the DSSI to bridge their liquidity problems or whose sovereign debt is unsustainable. Ethiopia and Zambia have submitted applications under the Common Framework, which has implications for both SERV and Switzerland. No concrete solutions have yet been agreed with regard to the applications.

SERV is also impacted by the replacement of LIBOR at the end of 2021: six countries’ debt rescheduling agreements are based on LIBOR and will need to be adjusted to a new interest rate basis. SERV managed to reach new agreements with four debtor countries in the year under review, while Switzerland is currently negotiating with two debtor countries.

The other countries listed in the table “Credit Balances from Debt Rescheduling Agreements” (cf. PDF p. 62) with which debt rescheduling agreements were concluded in the Paris Club were able to meet their payment obligations in the year under review.