State of the Trade Credit Insurance Market
A challenging environment presents an opportunity for growth.
Opening the door to a wider customer base
UK insolvencies are climbing to a 12-year high. With over 29,000 (24,000 year to date) businesses expected to fail before the end of 2024 according to the Allianz Trade Global Insolvency Report, many companies might view this as a period to hunker down. But for businesses with the right strategy, this challenging environment presents an opportunity for growth.
By leveraging tools such as trade credit insurance, you can protect your business from insolvency risks while opening the door to expanding your customer base. The construction, trade and hospitality sectors are among the hardest hit, accounting for 18%, 15%, and 14% of total insolvencies, respectively. Yet businesses across all industries have faced disruptions - from Brexit and the COVID-19 pandemic to rising interest rates and inflation. Insolvencies are forecast to decrease by 6% in 2025, but they will remain 30% above pre-pandemic levels. This means companies must stay vigilant.
The opportunity to expand
Turning risk into opportunity rather than seeing rising insolvencies as a barrier, however, gives smart businesses an opportunity to refine their approach. By ensuring their operations are protected from non-payment, they can confidently extend credit to new customers, enter new markets, and pursue growth. This allows businesses to safeguard their cash flow, but also access expert advice from the trade credit insurance market on creditworthiness, allowing them to extend larger lines of credit to trusted buyers. This protection gives smart businesses the confidence to expand while minimising the risk of bad debt.
Whilst we anticipate an increase in rates due to a rise in insolvency claims, premiums have been their lowest over the last 5 years prior and this adjustment will more than likely normalise premiums again. This coincided with new entrants into the insurance market such as Liberty, Mercury, Bondaval and Cartan, giving clients/prospects a plethora of solutions.
A good time to insure
Luke says, ‘considering the current economic outlook, now is a really good time to insure, with - broadly speaking - premiums being low and cover high, especially in the SME segment’.
With insurers being unable to rely on information readily available in the public domain as painting a true picture on debtor performance, there is more scrutiny over credit limit decisions and the level of cover being offered to clients on individual debtors. As a broker, one of our roles is to support key credit limit decisions and facilitate the flow of information to maximise cover where possible. We proactively manage our clients credit limit listings and leverage our insurer relationships to provide our clients with the very best solutions.’
PIB – a market-leading, specialist credit broker
PIB Insurance Brokers Trade Credit & Surety division has access to the whole credit & surety market, including Lloyds of London. Our comprehensive list of approved insurers and sureties enables us to provide clients with effective and cost-efficient credit insurance solutions. As a market-leading specialist credit broker, we have excellent relationships with all insurers and significant leverage giving clients access to the most suitable cover.
The current economic climate makes trade credit insurance a key component of any insurance programme where a business offers credit to its suppliers. The message is: if you haven’t considered trade credit insurance before, now is a good time to investigate. Using an independent broker will enable you to get full access to the whole market and review all available solutions. Coverage previously unavailable may now be possible and should be investigated.