TRADE CREDIT INSURANCE

& DATA-DRIVEN TRANSFORMATION

HASSEN BENNOUR

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TRADE CREDIT INSURANCE IS A GREAT PRODUCT

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 2

TYPICAL CUSTOMER EXPERIENCE IS AVERAGE

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 3

CAN “DATA LEADERSHIP” MAKE A DIFFERENCE?

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 4

CONTENTS

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 5

1. Risk Underwriting Automation

2. Artificial Intelligence

3. Data-Driven Innovation at Coface

4. Blockchain Prospects

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 6

Speed

Cost Efficiency

Accessibility & Penetration

Consistency

Claim Avoidance

BENEFITS

RISK UNDERWRITING AUTOMATION

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 7

AUTOMATION EVOLUTION

RISK UNDERWRITING AUTOMATION

Client Web Interfaces

Pre-Underwriting

Fully Automated Underwriting

“AI-based” Underwriting

New Technologies in TCI Ecosystem

Processing of large data volumes

APIs

Web Crawlers

Neural Networks

Explosion of data (internet and open source systems)

Emerging Trends in Automation

Natural language processing

Machine learning

Predictive Modeling

Parametric Insurance

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 8

┃Online Answer Possibility

┃Cost Reduction Opportunity

AUTOMATION CAME FIRST AS A WAY TO REDUCE LEAD TIMES

RISK UNDERWRITING AUTOMATION

Policyholder

ECA

Online

interface

Seller 2

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 9

┃Prepositioned Decision based on Repeated requests on Same Buyer

PARTIAL AUTOMATION CAN BRING GOOD BENEFIT 1/2

RISK UNDERWRITING AUTOMATION

Seller 1 Buyer

Official sources Information

provider

ECA

Analyst RUW

Pre-decision • Amount

• Number

• Period

WORKS WELL FOR HIGH PENETRATION DOMESTIC INSURERS

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 10

PARTIAL AUTOMATION CAN BRING GOOD BENEFIT 2/2

RISK UNDERWRITING AUTOMATION

┃Small Limits using Basic Statistical Matrixes and/or client knowledge / segmentation

Country Score

Ind

ust

ry S

ecto

r

nil nil 5K 15K 50K 150K

nil 5K 15K 50K 150K 150K

5K 15K 50K 150K 150K 150K

15K 50K 150K 150K 150K 150K

50K 150K 150K 150K 150K 150K

150K 150K 150K 150K 150K 150K

┃Typical dimensions would include :

• Country score

• Country

• Sector of policy holder

• Sector of debtor

• Payment terms

• Profitability of policy

• Risk sharing in policy

• …/…

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 11

┃Proper automation of RUW requires heavy IT investments:

• (i) Online Acquisition of Structured Data, (ii) Data Analysis Engine Development, (iii) Decision Engine Development

FULL AUTOMATION COMES AT A MUCH HIGHER COST

RISK UNDERWRITING AUTOMATION

Seller 1 Buyer

Official sources Information

provider

ECA

Analyst RUW

MORE REALISTIC FOR A (MULTI)DOMESTIC INSURER… UNLESS BASED ON FEW I.P.

Gateways

Decision engines

CONTENTS

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 12

1. Risk Underwriting Automation

2. Artificial Intelligence

3. Data-Driven Innovation at Coface

4. Blockchain Prospects

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 13

┃Improving Accuracy of classic Decision Engines

┃Improving Performance of both Scoring and final RUW

UPGRADING AUTOMATION WITH ARTIFICIAL INTELLIGENCE 1/2

ARTIFICIAL INTELLIGENCE

Seller 1 Buyer

Official sources Information

provider

ECA

Analyst RUW

THE SCENARIO OF REFERENCE REMAINS A COMBINATION OF THE VARIOUS GENERATIONS OF AUTOMATION

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 14

Conditions for using A.I. in RUW :

┃Skills in Data Science

┃Data. A lot of data …

┃Willingness to disrupt

A.I. projects in practice

┃Prepare the Data

┃Test Models

┃Fine-tune Algorithm Training

Industrialize

┃Reproduce Data Preparation

┃Algorithm Implementation

┃Governance

UPGRADING AUTOMATION WITH ARTIFICIAL INTELLIGENCE 2/2

ARTIFICIAL INTELLIGENCE

Requires a lot of

expertise

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 15

Limitations and difficulties in massive usage of A.I.

┃A data science algorithm is fundamentally a black box

┃An algorithm is trained based on events from a certain period.

┃What about risk-underwriter?

The $1M question : data champions as new entrants?

┃Marketplaces & GAFA

┃Banks

┃Other large scale servicers, potentially combining sets of data

HOW DEEPLY WILL A.I. TRANSFORM TRADE CREDIT INSURANCE?

ARTIFICIAL INTELLIGENCE

CONTENTS

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 16

1. Risk Underwriting Automation

2. Artificial Intelligence

3. Data-Driven Innovation at Coface

4. Blockchain Prospects

The result of the PoC were promising, to be confirmed in the industrialization

DATA-DRIVEN INNOVATION AT COFACE

Coface, the most agile global trade credit partner in the industry 17

A MODEL FOR DEBTOR RISK ASSESSMENT

Improve our risk decisions relying on advanced

decision trees (boosting)

The iterative algorithm focuses on hard-to-classsify

cases.

It combines several weak, tree-based learners into a

final, powerful one.

The underlying working mechanism is know as the

“wisdom of crowds”

DATA-DRIVEN INNOVATION AT COFACE

Coface, the most agile global trade credit partner in the industry 18

WEB-CRAWLING TO IMPROVE OUR WATCH SURVEY ON DEBTORS

Collect Store &

Analyse Structure Deliver Decide

Our watch needs Our expectation

Increase monitoring

scope

Reduce time

of manual

processing

Obtain relevant

information for

analysis

Improve current

watch methods Enhance our ability to capture information

ahead of time

Enable an information flow process

automation

Improve risk management

To Explore, Capture and Structure Web Information

Maximum potential of data without aggregation, leading to a more accurate score

DATA-DRIVEN INNOVATION AT COFACE

Coface, the most agile global trade credit partner in the industry 19

A MODEL TO PREDICT CHURN - INSPIRED BY THE BRAIN WORKS

Time

Eve

nts

CHURN SCORE

Hidden layers

Output layers Input layers

All clients are mapped on a time x events space and fed into a neural network

CONTENTS

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 20

1. Risk Underwriting Automation

2. Artificial Intelligence

3. Data-Driven Innovation at Coface

4. Blockchain Prospects

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 21

IN A NUTSHELL

BLOCKCHAIN

Distributed

Peer-to-peer

Consensus Protocol

Ledger

Anonymous

COFACE, THE MOST AGILE GLOBAL TRADE CREDIT PARTNER IN THE INDUSTRY 22

Potential Use Cases

┃Checking Policies Integrity

┃Documents and trade data distribution

┃Data Marketplaces

Reinvention Opportunities

┃Parametric credit protection

┃Protection for the crypto economy

┃Distributed trade protection

PROSPECTS IN THE TCI INDUSTRY

BLOCKCHAIN