The global trade credit insurance market is set for explosive growth, with projections indicating a surge to $27.56 Billion by 2031. This remarkable expansion, driven by the government initiatives supporting MSMEs and SMEs to adopt trade credit insurance and surge in business insolvencies.
NEW YORK, Dec. 2, 2024 /PRNewswire/ -- According to a new comprehensive report from The Insight Partners, "Trade Credit Insurance Market Size and Forecast (2021 - 2031), Global and Regional Share, Trend, and Growth Opportunity Analysis Report Coverage: By Enterprise Size, Application, End User, and Geography", the trade credit insurance market is observing significant growth owing to rise in inflation and high interest rates and the development of cloud-based trade credit insurance solutions.
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The report runs an in-depth analysis of market trends, key players, and future opportunities. In general, the Trade Credit Insurance Market comprises of enterprise size, end user, and application which are expected to register strength during the coming years.
Market Overview and Growth Trajectory:
Trade Credit Insurance Market Growth: According to an exhaustive report by The Insight Partners, the Trade Credit Insurance Market is experiencing significant growth, driven by the supply chain complexities and significant initiatives to promote AI use in trade credit insurance solutions. The market, valued at $14.19 Billion in 2023, is expected to grow at a Compound Annual Growth Rate (CAGR) of 8.7% during 2023-2031.
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Rise in Inflation and High Interest Rates: Inflation and high interest rates lead to financial vulnerabilities even when the business volume is not increasing. Rising business costs result in a higher risk of bad debts and counterparty default, which boosts the demand for trade credit insurance among businesses to support smooth operations. It protects insurers from default on payments due to increased costs, rising expenses, and high interest rates. Trade credit insurance supports businesses to increase their volume, support resilience in the face of continued volatility, and expand into new sectors and markets. Trade credit insurance provides businesses with an up-to-date insight into payment performance; for example, if the payment was made by their potential business partner on time or not. Furthermore, trade credit insurance gives insurers information that supports brokers to improve insurers' existing credit management methods and protect margins from being influenced by inflation and high interest rates.
Growing Trade Activities: A rise in trade and export activities has led to an increased demand for trade credit insurance among businesses to make payments and clear their pending debt. For instance, the president of Coface North America predicted that their trade credit insurance is expected to grow by 25% in 2024 due to growing export activities in the region. This creates opportunities for businesses to reduce their debts, improve cash flows, and facilitate sales.
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Growing Product Development: Increasing requirements for trade credit insurance among businesses encourages market players to develop new-generation services to meet their customers' requirements. For instance, in 2023, COFACE SA launched URBA360. It is a new online risk management tool that uses information from business reports, financials, economic briefings, and public and unique data sets to provide a comprehensive perspective of risk in graphic format. With this tool, businesses can easily understand their financial risks and select appropriate insurance coverage. Moreover, according to Allianz Trade data published in February 2024, the insolvency rate in North America has risen by 41%, which is expected to generate an additional risk of nonpayment for small suppliers. This created the demand for trade credit insurance among small suppliers to make timely payments.
Geographical Insights:Europe dominated the trade credit insurance market in 2023. North America is the second-largest contributor to the global trade credit insurance market, followed by Asia Pacific.
Trade Credit Insurance Market Segmentation, Applications, Geographical Insights:
- Based on enterprise size, the trade credit insurance market is segmented into SMEs and large enterprises. The large enterprises segment held a larger trade credit insurance market share in 2023.
- On the basis of application, the market is divided into domestic and international. The international segment held a larger trade credit insurance market share in 2023.
- Based on end user, the trade credit insurance market is segmented into energy, automotive, aerospace, chemicals, metals, agriculture, food and beverages, financial services, technology and telecommunications, transportation, and others. The energy segment held a larger trade credit insurance market share in 2023.
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Key Players and Competitive Landscape:
The Trade Credit Insurance Market is characterized by the presence of several major players, including:
- Allianz Trade
- COFACE SA
- American International Group Inc
- Chubb Ltd
- QBE Insurance Group Ltd
- Aon Plc
- Credendo
- Atradius NV
- Zurich Insurance Group AG
- Great American Insurance Company
These companies are adopting strategies such as new product launches, joint ventures, and geographical expansion to maintain their competitive edge in the market.
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Trade Credit Insurance Market Recent Developments and Innovations:
- "Zurich Insurance Group (Zurich) launched Zurich eXchange, a newly created global API marketplace that brings together the best services from the Zurich Group, enabling faster integration and more efficient collaboration within the company, along with customers and partners."
- "UK government announced a government-backed temporary reinsurance scheme to boost economic recovery. The Scheme is a recognition of the pivotal role played by credit insurers in modern trade and provides support to many businesses that rely on trade credit insurance. With the launch of this scheme, Atradius, a leading trade credit insurer, collaborated with the Department for Business, Energy and Industrial Strategy, UK Government, and launched a temporary, government-backed reinsurance scheme to help businesses recover from the impacts of the COVID-19 pandemic. The scheme aimed to help accelerate the economic recovery by ensuring the continued availability of trade credit insurance in the face of unprecedented financial pressures currently being experienced across most business sectors."
Conclusion:
Trade credit insurance is widely used by IT & telecom, retail, manufacturing, food & beverages, and other industries to protect themselves from financial risks. Technological advancement, a rise in inflation, a surge in complexities associated with the supply chains, and favorable government initiatives are propelling the trade credit insurance market growth. A rise in demand for trade credit insurance in SMEs, MSMEs, and larger enterprises for appropriately maintaining their revenue contributes significantly to the overall trade credit insurance market growth.
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Trade credit insurance is an essential credit risk management policy used for safeguarding the development of businesses by protecting them against losses associated with an unpaid invoice. It helps insurers by paying their bills due to insolvency, economic downturns, bankruptcy, and other issues. Political turmoil and unfavorable business developments may result in elevated risks for companies engaged in cross-border trading. This poses a major driving factor for the adoption of trade credit insurance solutions across the globe.
With projected growth to $27.56 Billion by 2031, the Trade Credit Insurance Market represents a significant opportunity for solution providers, system integrators, investors, industry stakeholders, end users and others. By staying abreast of market trends, embracing innovation, and focusing on quality and performance, companies can position themselves for success in this dynamic and evolving market landscape.
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