The Asia-Pacific region (APAC) has remained a focal point for trade finance in 2024, with regulatory upheavals, geopolitical tensions, and significant shifts in business practices all impacting the sector throughout the year.
Global trade volumes have been lower than expected, compounded by geopolitical friction and regulatory uncertainty. Basel IV, the evolving rules on bank capital requirements, has introduced ambiguity, casting a shadow over banking operations across the region.
Despite these challenges, APAC continues to be a significant player in global trade finance. The region’s core strengths—robust fundamentals, an expanding domestic market, and its role as a critical link in diversified supply chains—remain intact. As other regions face deceleration, analysts expect APAC to find growth, driven by markets such as India, Vietnam, Thailand, and Australia, buoyed by the China+1 strategy that aims to de-risk global supply chains.
To learn more about trade in the region and why firms should embrace uncertainty, Trade Finance Global (TFG) spoke with Hoang Anh Le Nguyen, APAC Geographic Lead – Trade Finance & Working Capital Solutions at Swiss Re Corporate Solutions, the commercial insurance arm of the Swiss Re Group.
Commercial uncertainty and the competitive market
Commercial uncertainty remains evident, with fluctuating trade flows reflecting the impact of elevated interest rates and postponed recovery expectations. Hoang Anh said, “Trade flows have remained lower for longer with interest rates staying elevated for most of 2024, and recovery expectations have been repeatedly postponed.”
This environment has stifled optimism, and financing facility utilisation has dwindled as companies wrestle with high costs, often turning to self-financing solutions. Practices such as shifting demands for local currency financing over US dollars illustrate companies seeking resilience amidst ongoing challenges.
The competitive market has also become increasingly unforgiving. Banks, contending with deteriorating credit conditions, have yet to adjust pricing for more vulnerable clients, even as payment terms are extended.
Geopolitical factors—from the Bangladesh protests to uncertainties surrounding US trade tariffs under the Trump Administration—have only tightened financing conditions across key geographies, affecting everything from risk appetite to pricing.
Impact of regulatory changes
Regulatory shifts have also had a significant impact. The removal of double default in Australia, making it more challenging to distribute well-rated risks, coupled with express assignment prohibitions in India, accentuates the obstacles to sustaining growth in APAC.
Swiss Re Corporate Solutions has responded by leveraging its regional presence and strong client relationships to ensure a rapid response to the needs of clients and brokers.
The expectation is that if financial institutions fully implement the new Basel IV standards, the distribution of risk to insurance partners will become more relevant, emphasising the insurance industry’s role as a reliable risk partner.
Hoang Anh said, “The full impacts from Basel IV remain to be seen for different banks adopting a standardised vs advanced approach. That said, we are convinced that the insurance industry will continue to be a safe and diversifying risk partner.”
Strategy and future opportunities
The reinsurance and commercial insurance sector is adapting to global market challenges through agility, data-driven decision-making, and strategic partnerships.
Swiss Re Corporate Solutions has built a global team spanning APAC, UK, EMEA, and North America. The team focuses on delivering trade finance solutions to financial clients, both financial institutions and corporate obligors.
These offerings include coverage for letters of credit, trade loans, bank guarantees, and a range of supply chain finance instruments. The firm has also made strides in underwriting larger, diversified portfolios through algorithmic means—an effort that exemplifies the increasingly sophisticated nature of the business.
Swiss Re Corporate Solutions are responding to evolving needs by extending existing programmes to cover select longer-tenor risks and using facultative reinsurance solutions to expand capacity. Growth potential is expected in areas such as supply chain finance, structured trade finance, special purpose and general purpose term loans, and non-bank financial institution (NBFI) financing.
Hoang Anh said, “We see opportunities on various fronts, especially as trade flows recover and financing conditions continue to improve across the region, especially in India, Vietnam, Thailand, Philippines, and Australia. We expect growth potential in supply chain finance, structured trade finance, special purpose and general purpose term loans, and NBFI financing, to name a few.”
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The story of trade finance in APAC today is one of resilience amidst uncertainty. Adaptability is essential to staying afloat, but helping others to do the same—finding opportunity amidst unpredictability—affords you a competitive edge. The most nimble organisations will likely dictate the future trajectory of APAC trade finance.
