With supply falling short in the credit insurance market, businesses are facing difficulties at managing their credit insurance policies. Companies with already existing insurance policies are struggling to retain their coverages, while companies that are trying to establish their credit insurance policies for the first time are unable to obtain sufficient coverage for their credit risk exposure. However, one can still secure an efficient insurance policy by having specific knowledge about this very specific insurance market, and by properly performing credit analysis and presenting the case to the underwriters.

What caused such changes in the credit insurance market?

The COVID-19 pandemic has had a more negative impact on economic activity than anticipated by markets, governments, and companies. As financial institutions such as the International Monetary Fund (IMF) began to predict a more gradual recovery, companies began to put more focus on sourcing the right tools to manage their upcoming risks. This has resulted in an increasing demand for establishing new insurance policies and modifying the existing ones.

By expecting a slower recovery and elevated level of defaults, underwriters have become more risk-averse and diligent at revising the existing or granting new insurance cover. As a consequence, corporations with existing credit insurance policies struggle with decreasing credit limits; and the ones aiming at establishing credit insurance policies for the first time, struggle with obtaining coverage for their buyer portfolio.

How to tackle the turbulent market?

In order to establish an optimal coverage that will successfully mitigate your credit risk exposure, it is important to first perform a data-driven credit risk analysis of your buyer portfolio. Not carrying out a proper credit risk assessment will most likely result in securing a suboptimal credit insurance policy. It will most probably have a lack of proper cover, and most likely be too expensive for the cover offered. Adding additional modules that fit your business model is of great importance here. As the policy is difficult – if not impossible – to adjust throughout the year it is of utmost importance to design an insurance program optimally at the start.

We are here to help you with designing and implementing an optimal credit insurance policy. Please do not hesitate to contact us at info@alpha-credo.si or give us a call on +386 (0)1 292 60 96. As an established specialist credit insurance broker, we have the understanding at both ends, i.e. clients’ needs and insurance market possibilities. We will be happy to assist you on every step of the way and navigate you through current rigidities of the credit insurance market and further increasing uncertainties, so you will avoid signing a plain vanilla credit insurance policy, which is a poor companion for this though times.

This article was written by the team at ALPHA CREDO