Research

Insurance Marketplace Realities 2019 — Trade Credit

November 6, 2018

Rate prediction

  Trend Range
Trade credit No change or slightly up Flat to +5%

Key takeaway

The strategic use of the trade credit product to enhance supply chain finance programs is now a key driver of revenue for trade credit insurers.

Conditions vary by industry sector.

  • The ongoing insolvencies and highly leveraged balance sheets in retail remain a challenge, resulting in very conservative underwriting in this sector.
  • The oil and gas industry’s stabilization has insurers looking to expand programs in this area of credit risk.

Regional/geographic variance is also a major driver.

  • Uncertainty in the Korean Peninsula has increased demand for insurance protection for credit risks across the APAC region.
  • As England struggles with adjusting to Brexit, higher than average credit insurance claim activity will continue in the U.K.
  • Insurers are looking to increase their risk appetite for LatAm credit exposures now that the economies of Brazil, Colombia, etc. are trending up.
  • The ongoing weakening of the Argentinian Peso and the Turkish Lira has most insurers hesitant to write new business in these markets.

Trade credit insurance premium rates are expected to remain flat or rise modestly through the rest of 2018 and into 2019.

  • Large losses are impacting the carriers, which will tighten their underwriting stances.
  • Trade credit insurance continues to support asset-based lending, receivables purchase programs and securitization wraps as companies monetize their receivables, and banks look to enhance their collateral for risks assumed.
  • Bank-driven premium has traditionally produced lower loss ratios, thus helping offset general price increases in the overall market.
  • The recent merger activity between insurers (and brokers) has had little to no impact on the trade credit market.