Insights Into the Current State of the Trade Credit Insurance Market

Trade Credit Insurance Market Update

Gary Kirshenbaum is the Director of Alper’s Global Trade Risk Management division

Many business owners and CFO’s are asking, “Why am I paying for a Trade Credit Insurance policy with coverage being reduced or cancelled?”

Because I’ve had this conversation with so many Clients since the start of the pandemic, here are my personal observations as well as what I’m hearing and reading from field experts regarding the current state and forecasts for Trade Credit Insurance and corporate credit globally.

  • If a company has invested in Trade Credit Insurance, now is not the time to go without coverage on receivables. The next 12-18 months will be tough for many companies/industries.
  • Trade Credit Insurance has become more expensive and policies with losses will see larger deductibles
    • Client’s who have renewed with me in the past several months have seen increases of 20-30%.
    • Coverage is tougher to secure, and more information is needed to do so.
    • This is happening globally! Companies in every industry with all carriers are experiencing these increases and complications.
    • We saw Trade Credit Insurance premiums increase and policy structure and coverage change due to the great financial crisis of 2008-2009. It started to roll back in 2011-2012. We expect this cycle to repeat itself here with a rollback sometime in 2022-2023.

 

  • As Clients see coverages reduced or cancelled, they should heed feedback from the insurance companies.
    • It is very possible your Clients’ customers may have a deteriorating credit profile.
    • The pandemic has caused dramatic, negative changes to certain industries. A lack of transparency means insurance companies may reduce coverage if the Insured does business in these distressed industries. The carriers are doing this in some cases to facilitate getting information about the customers for better transparency. While this may seem like a hassle, it’s truly a benefit to the Insured.
    • The moral of the story is Clients should be less resistant to asking their customers to send financial information to the insurers (under NDA’s). You can confidently assure them this has become more of a standard than ever before. I’m seeing companies who would resist sending info to the carriers now doing so without hesitation.

If you have questions about the information provided or Trade Credit Insurance in general, please reach out to Gary Kirshenbaum at GKirshenbaum@AlperServices.com or 312-867-7306.