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Survey Report

Insurance Marketplace Realities 2020 – Trade Credit

Property
Geopolitical Risk

November 13, 2019

Bank usage of trade credit insurance is at an all-time high and will continue to trend higher over the next several years, due to increased supply chain financing and the ability of banks to use trade credit insurance to obtain capital relief.
Rate predictions
  Trend Range
Trade credit Neutral (yellow line) –5% to +5%

Key takeaway

Bank usage of trade credit insurance is at an all-time high and will continue to trend higher over the next several years, due to increased supply chain financing and the ability of banks to use trade credit insurance to obtain capital relief.

Conditions vary by industry sector.
  • Awareness of trade credit insurance has risen across all sectors in the last several quarters. Macroeconomic factors (negative economic forecasts and a greater need for access to capital) and microeconomic factors (a greater awareness of incorporating the product into a client's total risk management strategy) are playing a significant role in this spike.
  • Capacity continues to remain restrictive or selective in the automotive, retail and commodities industries. Conversely, insurers continue to display an aggressive appetite for energy, computer/telecom and food sector risks.
For most buyers, rates are expected to remain flat into 2020 but market capacity is hardening.
  • Economists at several trade credit insurance markets are predicting a market recession in the first quarter of 2020. As a result, the market is beginning to harden, with capacity tightening in certain sectors, but, contrary to typical hardening markets, pricing remains competitive.
  • Bank business has continued to grow as originators and sellers seek more competitive terms from their banks. Supply chain financing partners are purchasing more cover, but insurers are becoming increasingly selective in the deals they support.
Financing and access to capital continue to play a major role
  • In cooperation with their banks, buyers continue to seek credit insurance to support more aggressive asset-based lending offerings and to access higher levels of capital financing.
  • Financial institutions continue to turn to credit insurance to support accounts receivable purchase programs and securitization programs, as demand for liquidity and access to capital continues to increase.
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