• 28 September 2021

Before joining insurance, Farris' experience was within international financial institutions where he was responsible for loan sales and unfunded risk distribution. We caught up him with to discuss his experience of integrating and using credit and political risk insurance (CPRI) from a bank perspective, and both the challenges and benefits he saw from the product.

Tell us about your experience with CPRI?


I began looking at the use of CPRI back in 2013. I was involved in the bank’s broker selection, product approval process, policy wording negotiations, drafting the bank’s policy and procedures for executing and monitoring insurance policies, as well as placing risks in the insurance market via our broker. Our Syndications desk was a natural fit for credit risk insurance (CRI), as we saw the product as another method of distribution, and our team had the expertise of underwriting and syndicating a variety of different loan products which we also insured. Once the bank executed our first insurance transaction and a few different teams had used the product, CRI became a mainstream product quite quickly and our insurance book grew accordingly.

Were there any challenges when integrating CRI into internal processes?


The new product approval process in any bank is quite arduous. A number of departments require explanations and assurances that the product is fit for purpose, internal systems are in place to booking and monitor the product, and the relevant teams have sufficient knowledge regarding policy obligations and how the insurance market works.

These days, most banks are aware of the CRI product, contrasting significantly to a decade ago when the product was more “in the shadows”. This increased awareness has been greatly helped by having the LMA involved in the project to create a standardised CRI policy template. The LMA’s stamp of approval, overseen by key market participants (including Miller and other brokers, underwriters, and Clifford Chance) will make it much easier for banks to get comfortable with using appropriately drafted policies as a form of Credit Risk Mitigation.

What did you do to address these challenges?


It’s important to get buy-in from key stakeholders, including senior management as well as Credit, Portfolio and Relationship Managers who will ultimately be the main beneficiaries of the product. Part of the on-boarding process is being able to raise awareness internally of how the insurance market works, the basis of law and regulations underpinning the credit risk insurance product and facilitating limit and capital relief. Our insurance broker was an invaluable part of this process and the best source of information and advice.

Each department will have specific concerns that need to be addressed, as well as parts of the bank that will not benefit directly, who may need a push from senior management to support the product. Although insurance is not a silver bullet for the bank’s limit and capital challenges, it is a tool that is an increasingly important to maintain competitiveness in today’s syndicated loan market.

Trading screen

Credit & political risks

What benefits did you see once CRI was in place?


CRI is a distribution channel that complements other forms of risk transfer, including secondary sales, sub-participations, and to a lesser extent CDS. Underwriters are non-competitors that provide a separate pool of capacity for virtually the entire range of banking products, from plain vanilla FIs, Structured Finance, L/Cs and practically everything in-between.

Political risk insurance was also a useful instrument in enabling lending to jurisdictions where underwriters were comfortable, but the bank did not have country limits. This allowed us to support clients in transactions we otherwise would have declined.

Another important feature is the silent nature of CRI, allowing the bank to show support to the client and maintaining its relationship status, while managing exposures in the background. On a personal basis, my team and I benefitted significantly from CRI making our desk relevant to more parts of the bank, and by working on deals that would not have come across our desk if insurance was not used.

Why did you decide to join Miller? 


I have quite a unique perspective of Miller, having been both a client and a competitor at different stages in my career. I was always impressed by Miller’s client servicing and saw this culture continue as the team grew over the years.

Miller has the critical mass to have knowledgeable and well-staffed departments and impressive support, while not being so large that you become just a small cog in the machine. There is a ‘can do’ attitude in the DNA of Miller where information sharing, best practice and inter-departmental cooperation is encouraged.

So when the opportunity came to bring my banking experience to the CPRI team, supported by GIC and Cinven's commitment to further grow the company, it was an easy decision for me to make in the end!