Canadian exporters are showing renewed interest in trade credit insurance as tariff uncertainty linked to former US President Donald Trump’s trade policies continues to raise concerns among businesses with cross-border operations.
Trade credit insurance, which typically covers up to 90% of unpaid invoices when foreign customers become insolvent, is common in Europe.
In Canada, however, less than 1% of foreign receivables are insured, despite international sales making up around 40% of export businesses’ revenue, according to the Receivables Insurance Association of Canada.
Historically, Canadian exporters have not widely used the coverage in trade with the US, its largest trading partner, accounting for over 75% of exports. Free trade agreements in place for the past 30 years have kept the perceived risk relatively low, insurers and brokers said.
However, the landscape has shifted following the imposition of tariffs on Canadian goods such as steel, aluminium and automotive parts during Trump’s first term.
Periods of economic stress, including the 2008–09 financial crisis and the COVID-19 pandemic, have seen increased demand for the product. A survey from Atradius back in 2021 revealed that 36% of Canadian businesses planned to adopt credit insurance despite an incoming recession.
A similar trend is now being observed, although exporters remain cautious due to the unpredictability of US policy changes.
"Tariffs are changing significantly from day to day," said Agatha Alstrom (pictured above), vice president of Insurance and Working Capital Solutions at Export Development Canada (EDC). She said the shifting nature of US tariffs has made it difficult for companies to assess how their business will be affected.
Trade credit insurance (TCI) is a financial safeguard that protects businesses against the risk of non-payment by their customers. This insurance is particularly valuable for companies that sell goods or services on credit, both domestically and internationally.
The process begins when a business applies for a TCI policy, providing the insurer with details about its customers and their credit terms. The insurer then assesses the creditworthiness of these customers and sets credit limits for each. These limits represent the maximum amount the insurer will reimburse in case of non-payment.
Once the policy is active, the business can offer credit to its customers within the established limits. If a customer fails to pay due to insolvency, protracted default, or political events, the insurer covers a significant portion of the unpaid invoice, typically between 75% and 95%.
In the event of non-payment, the business files a claim with the insurer, who investigates and, upon approval, compensates the business according to the policy terms.
The benefits of TCI are manifold. It mitigates the risk of bad debts, ensures consistent cash flow, enhances financing options by making insured receivables more attractive to lenders, and facilitates market expansion by providing the confidence to enter new or higher-risk markets.
EDC, the federal agency responsible for supporting Canadian exporters, manages a C$5 billion fund earmarked to assist companies affected by US tariffs. EDC is also the country’s largest provider of trade credit insurance.
While only 5% of exporters – around 7,000 to 10,000 businesses – currently have such coverage, interest is increasing. According to David Dienesch, CEO of Allianz Trade in Canada, inquiries have risen by 10% since January. He said that both Canadian and US firms are likely to see a rise in insolvencies, and that trade credit insurance can help limit the financial impact.
Executives said Canada’s retaliatory tariffs have added to the strain. Businesses are reporting tighter cash flows, missed payments and growing insolvency concerns. Michelle Davy, chair of the Receivables Insurance Association of Canada and president of broker CreditAssur Inc, said client concerns have become more frequent.
Demand for credit insurance also rose during the pandemic, when firms discovered gaps in their coverage for business interruptions, said Danish Yusuf, founder of business insurance provider Zensurance.
While Zensurance does not offer trade credit insurance, Yusuf said he regularly refers clients to firms that do.
Besides EDC and Allianz Trade, the major trade credit insurers in Canada include Coface, Atradius, FCIA (Great American Insurance Group), Intact Insurance Specialty Solutions, and NFP Canada.
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