Trade credit rates fall as capacity grows

New insurance capacity, increased insurer competition and improved risk management have led to positive developments for buyers of trade credit insurance across most of Europe, according to Marsh.
The broker’s latest data for 2010 suggests trade credit insurance rates are reducing in France, Germany, Italy and the UK.

Meanwhile, rates are stable or experiencing minimal increases in Belgium, Denmark and The Netherlands; and localised increases are being recorded in Greece, Portugal and Spain. Trade credit cover is also becoming easier to procure, with insurers no longer taking industry sector-wide underwriting decisions.

Tim Smith, Leader of Marsh’s trade credit practice in Europe, the Middle East and Africa, commented: “The trade credit insurance market has been transformed in 2010 with rates falling or stabilising in most key European markets. Following the recession and the widespread cancellation of cover in certain high-risk industry sectors, insurers are now writing more business and deciding cover on a company-by-company basis.

“As insurers have developed more sophisticated risk assessment techniques, so companies are more willing to share financial information and formalise their business order policies. This both aids insurance procurement and helps companies obtain better terms.

“Demand for trade credit insurance remains strong. Entry to the market by insurers new to the sector has increased capacity and competition for business among trade credit insurers. For companies seeking trade credit insurance, the outlook for the remainder of the year and into 2011 is very encouraging, especially for organisations with strong credit management procedures. “