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Trade Credit Insurance Market

Trade Credit Insurance Market: Information by Component (Products, Services), Coverage (Whole Turnover, Single Buyer), Enterprise Size (Small, Medium, Large), and Region — Forecast till 2030

Published At : 14 Jul, 2022
Updated At : 29 Aug, 2022
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Market Snapshot

Base Year:
2021
Study Period:
2020-2030
CAGR:
9 %
Fastest Growing Market:
Asia Pacific
Largest Market:
Europe

The global trade credit insurance market size was valued at USD 11,174 million in 2021 and is anticipated to generate USD 24,472 million by 2030. The market is projected to grow at a CAGR of 9% during the forecast period (2022–2030). Trade credit insurance is a form of insurance that was developed to shield companies from the political and economic risks that could have an effect on the company's financial situation. It is a subcategory of property and casualty insurance that is typically made available to commercial entities or private persons by private insurance companies and governmental bodies that are in charge of export credit. In addition, a significant portion of the purpose of trade credit insurance is to safeguard accounts receivable from the possibility of loss brought on by credit risks such as prolonged default, insolvency, or bankruptcy.

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Market Dynamics

 Market Drivers

  • Rapid growth in New Geographical Markets Soaring Market Growth

Due to a surge in global export and import of goods and services, the development of commerce into new locations has gained traction in the industry. Furthermore, due to increased trade, which includes granting letters of credit (LCs), receivables & invoice finance, and others, demand for credit insurance has increased and is likely to maintain its supremacy during the trade credit insurance forecast period. Manufacturers, importers, exporters, buyers, and sellers use trade credit to make financing transactions easier. As a result, the growing demand for goods and services from one country to another and the expansion of trade across different regions have raised the market's need for trade credit insurance. 

  • Rising commercial threat surging Global Market

Political instability, contract cancellations, import restrictions, and trade wars are critical industry growth drivers. Furthermore, merchants frequently purchase trade credit insurance to help offset such threats and risks while selling internationally since it protects sellers from non-payment and allows them to expand their business without worrying about losing money. Furthermore, as globalization, terrorism, currency demonetization, exchange rate volatility, bankruptcy protection, and other factors increase, trade credit insurance becomes a more substantial product for traders, accelerating trade market growth. 

  • Benefits of Trade Credit Insurance Boosting Market Demand 

Trade credit insurance increases sales by providing advantageous credit conditions to clients, protects against customer default or insolvency, minimizes concentration concerns, and makes bank financing easier, among other things. Furthermore, it assists firms in transferring risk from accounts receivables that are in danger of non-payment. Furthermore, trade credit insurance benefits large, small, and medium businesses that deal abroad in various industries. The market's growth is fueled by the substantial benefits provided by trade credit insurance adoption and implementation.

Market Restraints

  • Various and Conflicting Trade Regulations Resisting Global Market

Various laws have varying norms and rules across countries, with financial centers taking a more united approach to trade regulation. This becomes a critical component for credit insurance businesses to provide solutions, resulting in an inter-regulatory conflict that hinders the credit insurance market's growth. For example, in the United States, Export Credit Insurance (ECI) protects a product or service exporter against the risk of non-payment by a foreign customer. As a result, following regulatory criteria in separate nations before providing trade credit insurance is a major stumbling block to the market's expansion. 

  • Trade Credit Insurance Ignorance Hampering Market Growth

Lower trade credit insurance premium standardization, lack of awareness about trade credit insurance distribution in contrast to other lines of insurance, and lower broker investment in distributing this line of business are the primary reasons restricting the trade credit insurance market growth. Furthermore, industry standards aren't fully established, and different regulations impose varied norms and conditions on merchants, which is predicted to stifle market expansion.

 Market Opportunities

  • Global Small and Medium Enterprises Growth Giving New Openings 

Trade credit insurance protects small and medium-sized businesses and suppliers of goods and services from non-payment by their clients. Furthermore, many businesses are looking for new ways to trade to expand their market share and expand their business abroad. Furthermore, trade credit insurance is gaining popularity as a way for these businesses to expand sustainably, prompting small business owners to seek financing through trade credit insurance as a safe way to trade. As a result, the rise in the number of small and medium businesses seeking to expand into global commerce and the numerous benefits given by trade credit insurance are driving the market growth. 

  • Untapped Potential in Emerging Economies Providing Opportunities 

Developing economies give trade credit insurance solution providers considerable opportunity to increase their solutions, as many enterprises deal in credit trades, and the trade credit insurance market is likely to grow in the future years. High investments in global trade expansion and rapid domestic firm growth, particularly in nations like Australia, China, India, Singapore, and South Korea, are expected to use trade credit insurance while trading across global marketplaces. Furthermore, several developing countries in Asia-Pacific are experiencing rapid expansion in their industrial sectors. With a wide range of manufacturing industries, the region has evolved into a global manufacturing hub. As a result, this region is predicted to grow due to the increased involvement of export credit insurance and the liberalized export credit market, with an increase in small and medium enterprises.

 

Segmental Analysis 

The global trade credit insurance market share is categorized by component, coverage, enterprise size, application, and industry vertical.

Based on the types of components, the market is classified into product and service. Their market revenue was valued at USD 8826 million and USD 2090 million, respectively, in 2021. Product is the largest shareholder in the global market. Trade credit insurance products provide structured trade credit solutions by casing against country, timing & performance risk, expropriation & nationalization, the unjust calling of bonds, and others, which is driving the trade market growth of this segment during the forecast period. The global market for the product is projected to generate USD 18,392 million in 2030 and grow at a CAGR of 9% by 2030. The global market for service is projected to generate USD 5346 million in 2030 and grow at a CAGR of 11% by 2030. Trade credit insurance services streamline and automate trade credit insurance operations, reducing the time and costs associated with trading systems during the initial phase of deployment and fueling the market growth of the services segment.

Trade credit insurance is segmented as whole turnover coverage and single buyer coverage based on the coverage. Whole turnover coverage is the highest market shareholder and was valued at USD 8952 million in 2021. The global market for whole turnover coverage is projected to generate USD 18967 million in 2030 and grow at a CAGR of 9% by 2030. Previous loss records, estimated future losses for the client's portfolio, the quality of the customer base, anticipated turnover & trading expectations, and other factors are used to underwrite this coverage. Because of these characteristics, whole turnover credit insurance provides a proportion of coverage for the entire balance sheet, and its demand is expected to rise in the trade credit insurance market. Single buyer coverage was valued at USD 1964 million in 2021 and is projected to generate USD 4824 million at a CAGR of 11% by 2030. As it provides a credit limit that allows underwriters to cover all transactions with the customer, the single buyer coverage segment is likely to increase at a considerable rate. This policy offers highly personalized protection against both economic and political threats. These elements are primarily responsible for the segment's growth.

On the basis of enterprise size, the market is segmented into small, medium-sized, and large enterprises. Large enterprise holds the largest market share, which was valued at USD 8073 million in 2021. It is anticipated to generate USD 16409 million at a CAGR of 8% by 2030. Large organizations in various industries, including healthcare, media and technology, electricity and utilities, and others, have been early adopters of trade credit insurance services in recent years. Huge enterprises in these areas trade on a colossal scale and earn more money. These factors boost the market growth. The global market for the medium-sized enterprise was valued at USD 1700 million in 2021 and is projected to generate USD 4075 million in 2030 and grow at a CAGR of 10% by 2030. Due to a lack of collateral, credit history, and guarantees, medium-sized enterprises experience difficulties acquiring funding from various banks and financial organizations; these businesses are diversifying their operations, which is expected to fuel the expansion of trade credit insurance in this market. The global market for the small enterprise was valued at USD 1143 million in 2021 and is projected to generate USD 3352 million in 2030 and grow at a CAGR of 13% by 2030. One of the primary reasons driving the market growth is the expansion of enterprises in terms of local and international trade.

As per application, domestic and international applications are the market categories. The global market for domestic applications was valued at USD 8638 million in 2021 and is projected to generate USD 17,704 million in 2030 and grow at a CAGR of 8% by 2030. A trade credit insurance policy covers the unpaid credit balance from sales, which protects domestic or export enterprises by reducing the risks connected with a customer's insolvency or late payment. As a result of these reasons, trade credit insurance is growing in the domestic market. The global market for international applications was valued at USD 2278 million in 2021 and is projected to generate USD 6070 million in 2030 and grow at a CAGR of 12% by 2030. Export credit agencies assist international traders by providing insurance in more risky emerging overseas markets where commercial insurers may not be available. This is one of the primary factors driving market growth in trade credit insurance.

According to industry verticals, manufacturing, construction, and IT & Telecom are the major contributors to the trade credit insurance market. Manufacturing was valued at USD 3253 million in 2021 and is projected to generate USD 5930 million at a CAGR of 7% by 2030. The manufacturer is covered up to a predetermined percentage of any losses incurred due to late payment. Furthermore, traders in this industry employ trade credit insurance policies to borrow money from their commercial bank against their covered receivables, subject to specific limitations. As a result, manufacturing companies turn to trade credit insurance due to market growth. Construction was valued at USD 2119 million in 2021 and is projected to generate USD 4379 million at a CAGR of 9% by 2030. In the construction sector, an increase in buyer insolvency, pressure on liquidity, depriving SMEs, and forcing adjustments to payment terms are the key drivers driving the expansion of trade credit insurance.  market growth is fueled by challenges such as squeezed margins, rising labor and raw material costs, and disputed payments, all of which pose high risks of a long-term construction project collapsing. IT & Telecom was valued at USD 1723 million in 2021 and is projected to generate USD 4030 million at a CAGR of 10% by 2030. Trade credit insurance is required by IT and telecom companies to protect private and high-value raw data, which drives the worldwide trade credit insurance industry. The IT and telecom industries are pushing past the commoditization of voice and data services to create inventive new revenue streams worldwide. The market for trade credit insurance is growing due to these causes.

 

Regional Analysis 

Europe to be the Largest Revenue Holder in Global Market

Trade Credit Insurance Market Regional Analysis

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Based on region, the trade credit insurance market is segmented into North America, Europe, Asia-Pacific, and LAMEA. Europe is anticipated to hold the largest trade credit insurance market share of USD 8045 million by 2030 at a CAGR of 8% during the forecast period. The market in Europe was valued at USD 4196 million in 2021. Due to SME globalization and increased trade, this area dominates global trade finance. Due to the COVID-19 health issue, EU governments are guaranteeing credit insurers as several companies withdraw from Italy and Spain trade coverage. Therefore, it is anticipated that demand for trade credit insurance will increase throughout Europe. UK and France have more market revenue compared to Germany and Italy. The market revenue of the UK and France were valued at USD 819 million and USD 719 million, respectively, in 2021. 

Asia-Pacific is the second contributor to the trade credit insurance market with revenue of USD 3237 million in 2021 and is expected to generate USD 8348 million in 2030 at a CAGR of 11%. The confirming banks and issuing banks are still working on ways to expand their trade finance services, which is driving up demand for trade credit insurance in the region. China is the most significant contributor to the market compared to other countries, which was valued at USD 1726 million in 2021. Japan and Australia are growing their market gradually with market revenue of USD 271 million and USD 248 million, respectively, in 2021. 

The trade credit insurance market in North America is expected to witness steady growth with a value of USD 1979 million in 2021. The market in this region is anticipated to generate USD 3989 million at a CAGR of 8% by 2030. Rising demand for goods and services, fast business transactions, and secure exchanges are driving the growth of the region's trade credit insurance market. Increased trader awareness of trade credit insurance and global firms working with regulatory bodies to operate globally fuel this sector. The US has the primary market in this region, with a revenue of USD 1848 million in 2021. 

LAMEA has the lowest market. In 2021, the market revenue was valued at USD 1506 million, with Latin America being their major contributor. Several LAMEA trade credit insurers are implementing an exclusive credit limit and exposure management platform. This lets traders monitor credit limits and discounted receivables. Key stakeholders provide a foundation for export rules that regulate country, operation type, and business division. This enhances LAMEA credit insurance. The market is projected to generate USD 3408 million at a CAGR of 10% by 2030.

 

Competitive Players 

The key players in the global trade credit insurance market are American International Group, Inc., Aon plc, Atradius NV, Coface, Credendo, EULER HERMES, Export Development Canada, QBE Insurance (Australia) Ltd., SINOSURE and Zurich, among these.

 

Recent Developments by Key Players

  • In December 2020, Coface partnered with the Italian government to offer numerous benefits such as reducing credit management costs, protecting against the risk of non-payment, and easy access to bank credit and factoring.
  • In November 2020, Receivables Exchange of India Ltd. partnered with American International Group, Inc to launch trade credit insurance on the TReDS platform. 
  • In February 2020, Euler Hermes partnered with Toucan Toco to launch TradeMatch, which allows trade credit insurance policyholders to be informed 24/7 about commercial risks.
  • In June 2020, Zurich expanded its business by launching trade credit insurance services in the UK. This insurance helps businesses across the region to trade with confidence during the COVID-19 outbreak.

 

Global Trade Credit Insurance Market- Segmentation

By Component

  • Products
  • Services

By Coverage

  • Whole Turnover Coverage
  • Single Buyer Coverage

By Enterprise Size

  • Small Enterprises
  • Medium-sized Enterprises
  • Large Enterprises

By Application

  • Domestic
  • International

By Industry Vertical

  • Manufacturing
  • Construction
  • IT & Telecom
  • Healthcare & Pharmaceuticals
  • Energy & Utilities
  • Consumers Goods & Food Products
  • Others

By Region

  • North America
  • Asia Pacific
  • Europe
  • LAMEA
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