2022 insurance highlights
- Global trade credit insurance market reached $13.89 billion
- Insured shipments reached $7 trillion
- Penetration rate: 13.16% of worldwide trade in goods
Trade credit insurance has been pivotal in risk management for businesses, notably in mitigating the risk of unpaid invoices, a major concern affecting business continuity. A closer look at the extent of protection offered by trade credit insurance illuminates the challenges confronting businesses and suggests possible remedies.
What is trade credit insurance?
Trade credit insurance guards against the non-payment of trade receivables. Primarily, ICISA members offer short-term, comprehensive coverage for invoices typically due within one year.
Insurers collaborate with policyholders to set credit limits for commercial customers and indemnify businesses against losses from insolvency or extended defaults, thereby enabling investment in growth and innovation.
Additionally, it is crucial for businesses seeking favourable financing terms to enhance cash flow security. Banks also rely on this insurance to minimise credit risk, facilitating broader financing across the real economy.
Estimating the impact of trade credit insurance
Evaluating the industry’s impact on global trade is challenging due to limited data and varying definitions across regions and companies. ICISA has estimated the 2022 impact of the global trade credit insurance market.
According to ICISA, the market reached a premium volume of $13.89 billion in 2022, insuring shipments worth over $7 trillion. The penetration rate was 13.16% of global trade, based on World Bank data. Private market participants, especially ICISA members, accounted for 69% of this coverage.
Despite differing estimates, the consistency in these figures lends credibility to the market’s size and impact in global trade.
Interpreting the statistics
The data underscores the substantial contribution of the trade credit insurance sector to the real economy. However, it also indicates a significant protection gap, particularly affecting smaller firms, more so in regions where this product is less prevalent, such as outside Europe.