Abstract
In
this paper, we study credit insurance in Israel between 2010 and 2017, using a
unique database provided for our use by ICIC—the Israeli Credit Insurance
Company, the leading credit insurer in Israel. The research aims to determine
what factors impact on the acceptance rate (the amount of insurance provided
relative to the amount of insurance requested). This is the main parameter set
by ICIC, and it reflects the pricing of the risks in each transaction. We find
that the acceptance rate is impacted on primarily by the extent of the
insurance company's exposure to the buyer's country, but also by the size of
the insured company, the risk of the buyer with whom the company is
transacting, and by the global real economic situation. These factors impact
differently on domestic buyers and on buyers abroad, apparently due to
differences in information on the two types of buyers. In addition, we examine
the scope of exports insured by credit insurance and characterize them by geographical
distribution and by risk levels. Finally, we examine—for the first time in
Israel—suppliers' credit and find a strong link between suppliers' credit risk
and real activity.