The trade credit market is seeing hardening rates, which could be good news for brokers.
After two years of falling insolvency numbers around the world, 2017 could see numbers begin to rise. Euler Hermes recently noted that bankruptcies are on the rise in Asia Pacific with worldwide insolvencies set to increase by 1% over 2017.
As insolvency numbers increase, trade credit cover is more important to clients than ever before and Mark Hoppe, managing director of the Australian branch of Atradius, said the market will keep improving.
“The market hardened in the backend of last year and I think that it will continue to do so,” Hoppe told Insurance Business.
“We will still see things harden but bearing in mind that it is hardening from a very soft place. Last year, while we did increase rates, the rates that were offered in 2016 were still lower than were being offered in 2014.”
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While the market may not return to its highs seen during the global financial crisis, trade credit is another market expected to make gains as hardening continues in 2017.
Kirk Cheesman, managing director of specialist trade credit brokerage NCI, said that he expects “some stabilisation” in the trade credit market over the course of 2017 as claims look set to continue.
“Our other indicators, like overdue payment reports and collections actions, seem to anticipate there are still further insolvencies to come,” Cheesman told Insurance Business.
For brokers, Cheesman advised discussing with clients what the impact of their largest client failing to pay would have on their business as a way to broach the affordable yet necessary cover.
Both 2015 and 2016 saw an increase in claims in the trade credit market and payouts in these instances help to demonstrate the benefits that a trade credit policy can present to a business.
For Hoppe, he expects 2017 to be “one of the more uncertain years” that he has ever seen.
“There are some positive signs… but there are also some negative signs in regards to trade agreements, and uncertainty in the world,” he explained.
“It really is more of an uncertain environment than ever and uncertainty is when you want to be insured.”
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