Trade credit insurance demand up, well ahead of claim trend

Demand for trade credit insurance has been sharply on the rise in 2023 even as claim trends have yet to show signs of actual credit stress, brokers at  Marsh have claimed.

“Businesses and banks have shown increasing recognition of the growing risk of credit default, which is driving higher demand,” authors of Marsh’s semi-annual report on credit specialty lines stated, citing a 20% increase in new inquiries received by Marsh in 2023 versus 2022.

“A moderate claims environment is resulting in improved insurer risk appetite and increased capacity — both of which are contributing to increasingly competitive rates for insureds,” authors claimed.

Demand is ahead of the curve. While claims volumes returned to pre-pandemic levels, “there has yet to be a corresponding increase in the severity of loss trend.”

Underwriter appetite is more than keeping pace, authors wrote, citing a 6 point y/y rise in acceptance rates for large client credit limit requests to an average of 81% in H1 2023, the highest level since March 2021. Marsh data suggests a 25% y/y increase in 2023 in aggregate gross limit per $1 of premium, a 36% increase over the prior 3Y average.  

Stated in terms of rates, the market has continued to soften, Marsh brokers noted, citing average premium rate for 2023 at 0.159% of value, a level authors call "slightly below" 2020-2023 average.