Trade credit reinsurance market stable with growing capacity

The reinsurance market for trade credit has largely remained stable, with capacity increasing despite continued global economic uncertainty. Reinsurance brokers report that trade credit insurance losses have been below normal levels, but demand is being driven by inflation. Gallagher Re said loss ratios have continued to normalise after the low loss activity seen during Covid-19 but remain below the historic mean average. It said inflation continued to drive demand for the cover, and the trend of increasing insured limits on peak risks also continued. The broker said that reinsurer appetite increased compared to the January 2023 renewals, due to the combined effects of underlying performance remaining strong, and less ‘top down’ influence on the credit reinsurance teams regarding the wider reinsurance environment. Aon said that despite continued global economic uncertainty, the credit insurance market remains relatively stable, and the whole turnover trade credit reinsurance market is seeing ample capacity. “Despite current economic and geopolitical uncertainty, increasing default rates in the wider economy, and growing exposure levels, trade credit insurance losses have been below normal levels, a reflection of government support for economies during Covid-19 and insurers continuing to exercise prudent risk selection,” said Aon. The broker added: “With largely sufficient capacity in the market, proportional pricing is stable, although there has been evidence of some profit-related improvements. Excess of loss pricing, however, is seeing a repeat of 2022/2023, with increases predominantly due to increased exposure levels as well as a repricing of risk to reflect the macro-economic uncertainty.” Aon explained that loss ratios in the trade credit and structured credit areas remain positive, leading to the stability of terms. However, it noted: “Exposures in the market are increasing, both in terms of the size of individual risks and in the overall aggregate due to inflation’s impact and, in certain areas, increased demand from banks. Where insurers have sought to purchase higher limits, reinsurers have been accommodating, where requests are reasonable and correspond to programme structures. However, given current levels of capacity usage, brokers and insurers resisted some reinsurers’ efforts to raise attachment points on excess of loss covers.” As for political risk, Gallagher Re noted that although original total exposure from the Russia/Ukraine conflict has continued to fall, 2023 has seen an increase in loss notifications. It said this, alongside concerns over sub-Saharan Africa and general global economic challenges, had seen reinsurance capacity down, year on year. Aon said that on the structured credit & political risk side, insurers and reinsurers continue to closely monitor exposure to emerging market debt, most notably African sovereign debt. It said: “Claims have materialised in the last 18 months, notably in Ghana and Zambia, although losses appear to be manageable at this time. This segment has also seen claims related to the Ukraine-Russia conflict crystalise in 2023, although these also remain manageable in relation to the overall market.”

Trade credit reinsurance market stable with growing capacity

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