Every buyer loves being in the catbird seat, savoring one of those moments when sellers are jostling one another to snag his business. And that, fortunately for American exporters, is where they now find themselves in buying credit insurance.

These days, eleven companies are competing to sell protection against the risk of non-payment by foreign customers. That has brought expanded capacity to handle risk, an intense rivalry, lower premium rates, and more varied underwriting strategies.

And, it means not only being able to pick and choose among insurers fighting for the business, but also to customize policies from the competing products that the new rivalry offers.

The roster of rival insurers now includes three U.S. home-grown firms and eight overseas-based groups, evidence that globalization has fully arrived in the world of credit protection. There’s a lot to choose from.

The American contingent includes FCIA Management, the pioneer (1960s) in the field; global giant American International Group, and HCC Credit Group, launched in 2005 by Houston Casualty Company.

Then there’s a “European transplants” group, three large credit insurance specialists that bought U.S. insurers, including Atradius Trade Credit Insurance (Amsterdam HQ), Coface North America (Paris), and Euler Hermes ACI (Paris).

Finally, there’s QBE Trade Credit, part of Australia’s QBE Insurance Group; Zurich Emerging Markets Solutions, a unit of Switzerland’s Zurich Financial Services Group; Exporters Insurance Co. and Ace Ltd., both from Bermuda, and venerable Lloyd’s of London, which reaches U.S. exporters through brokers.

But, not surprisingly, the abundance of choice has brought fresh challenges. With so many insurers and so many underwriting styles now on offer, exporters can find decision-making a bit daunting. That makes it a good time for the nationwide network of specialty brokers (30-35 of them) that place most of the business.

“With all these variables, you really need a knowledgeable broker to conduct the bidding,” says Carey Fiertz, head of Export Risk Management in Salisbury, Conn., a trade credit specialist.

His clients now receive competing bids in which premiums might be based on the sales volume, the approved credit limits, or the receivables outstanding. “And some of the quotes have deductibles, some have high discretionary credit limits, and some have neither.”

So, “even if an exporter is familiar with credit insurance, it can be difficult sorting through the differences without impartial assistance.”

Part of the challenge has been created by the “transplants,” who brought a “European style” underwriting to the short-term multi-buyer policy, the most actively used product in the field. Here, the underwriter evaluates the creditworthiness of each covered buyer up front, then sets a credit limit on each, and provides insurance to protect against that exposure. The insurer really manages the credit operations.

This contrasts with the traditional “American style” of underwriting in which the insurer instead evaluates the credit management ability of the exporter, based on systems in place and the experience of the managers (who are often interviewed). Then, a discretionary credit limit is approved, with the exporter absorbing a deductible and co-insurance, and the insurer sharing the risk. The exporter manages its own receivables.

But, that’s just where the choices begin. As Gary Mendell, head of Santa Monica, California-based Meridian Finance Group (specialty broker and financial arranger), says, there is now lots of variety among the insurers within each of these underwriting styles, “the lines have become blurred, and price is only one factor.”

It’s rare that any two quotes are the same. There’s much more horse-trading between exporters and insurers in setting the parameters of each policy. Plus, the underwriters, more than in the past, can offer unique choices. “There may be a buyer that only one insurer will cover,” says Mendell, which would determine the choice. And some underwriters take a country risk that others will not.

Meanwhile, dramatic policy developments have surfaced in other kinds of policies. Perhaps most significantly, private insurers now offer medium-term coverage that supports the sale of equipment and machinery, a part of the business that has been provided until now mostly by the U.S. Export-Import Bank.

Most private insurers offer three-year terms, compared with Ex-Im Bank’s five years, says Edward Yauch, a partner in Columbus, Ohio-based International Risk Consultants, a specialty broker. And the private underwriters usually cover smaller portions of a deal, perhaps 50 percent in some cases, compared with Ex-Im’s 100 percent of the financed segment.

Still, at least seven of them have moved into the medium-term business, including Zurich, Exporters Insurance, American International Group, FCIA, Atradius, Coface, and HCC. And some of the cover goes to five years, especially with a rated buyer.

Key account policies are also a growing trend. Here, both U.S. and overseas-based insurers cover two or three, or perhaps 10-15, top buyers in an exporter’s receivables portfolio. And, since each buyer is evaluated up front, with a credit limit and no exporter discretion, the two rival underwriting groups converge into a single approach.

Finally, while the insurers look like they are here to stay, the current favorable conditions—lower premium rates, more flexible, competitive policies—can be expected to become tougher. It’s just the way the insurance industry works. “Buy the insurance now while it’s cheap, since you know the cycle will turn at some point,” says Carey Fiertz.

And then, when capacity becomes more limited, “it will be allocated to existing clients before any new ones, he adds.”

A veteran underwriter puts it more dramatically. “Insurers are now offering medium-term cover, but if conditions grow riskier, it could all turn on a dime.”

So jump in while the good times roll.

Sidebar: Surge Capital Fills A Void

The importer/distributor working on a fast-paced transaction between a manufacturer and a retailer has typically found himself the ‘odd man out’ when it comes to trade finance. This is the space that Surge Capital has carved out for itself, financing transactions by effectively making a loan to their middleman client to help finance a big production order.

“Our typical client is the guy in the middle between China and the U.S.,” says John Maselli, Senior Credit Officer for the firm that was founded five years ago. “He’s been going to China for a dozen years, can help develop product, knows which factories are capable and has great contacts with big retailers ready to buy the product.”

He cites, for example, iPod accessories, which are currently hot. Their client helps develop the concept, say, a stereo alarm clock able to play the iPod. The manufacturer, typically, does not have sufficient operating capital to underwrite the huge production ‘surge’ associated with this deal. Understandably, they get nervous at the commitment that such additional volume entails. That’s where Surge comes in. “Effectively we make a loan to our client for up to 100% of cost and the proceeds go to the factory.”

“We’re dealing with entrepreneurial, owner-operated, fast growing companies who are opportunistic—they see a need and know how to fill that need. If they come up with a hot product, think of toys, the demand is incredible. This creates big financing need that typically a bank won’t step up to.”

Surge largely finances short-term transactions; goods are typically made, delivered and paid for from 30 to 120 days.

“We prefer to deal with a small number of clients with excellent growth potential, capable of doing significant deals,” explains Maselli. “We build on-going relationships through repeat transactions, providing all participants the resources to achieve their business goals.”