Skip to main content
Survey Report

Insurance Marketplace Realities 2021 – Trade credit

Credit, Political Risk and Terrorism
N/A

November 18, 2020

Having a trade credit policy in place provides an oasis to insureds who procured the protection before the economic downturn.

Rate predictions

Rate predictions: Trade credit
  Trend Range
Trade credit Increase (purple triangle pointing up) +10% to +40%

Key takeaway

The ongoing economic contraction and resulting losses due to COVID-19, coupled with an uncertain economic future, offer a reminder that trade credit insurance is a strategic buy, as having a trade credit policy in place provides an oasis to insureds who procured the protection prior to the economic downturn.

A spike in losses has created a much more challenging underwriting environment, driving harder market conditions.

  • The world’s three largest trade credit insurers, representing about 70% of the market in the U.S., recently formed a coalition to approach the U.S. government for reinsurance support for trade credit carriers to help with needed capacity in support of open credit lines.
  • They warn that reduced capacity for the trade credit insurance (TCI) industry could disrupt the stability of a multitude of businesses across the U.S.
  • Insurers are bracing for a potential second outbreak of COVID-19. If this comes to fruition, which appears to be the case at time of this writing, further tightening will occur.
  • Premium rate increases should settle in the 10% to 20% range for the remainder of the year, depending on loss ratio and industry sector — though some will see increases up to 40%.

Both insurers and buyers need to face the significant trade credit repercussions of the current economic downturn.

  • Insurers have advised that they have largely completed their risk exercises to right size their portfolios — barring further significant developments relative to the global economy or specific trade sectors.
  • The apocalyptic outlook that was foreseen in April and May of this year has tapered off. However, the economic uncertainty created by this pandemic may further pressure capacity restrictions.

Banks and credit insurers are working jointly on a streamlined policy template.

  • Banking and private equity financing programs continue to see an uptick in demand given the current economic climate and focus on liquidity sources. Due to the monetization focus, quality of risk and profitability of these programs, they face fewer negative risk actions and pricing hikes from the insurers than other trade credit policies in the market.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

Contact

Scott Ettien
Global Head of Trade Credit

Contact Us