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What Is Happening To The Credit Insurance Market In 2020

By April 14, 2020 No Comments

What Is Happening To The Credit Insurance Market In 2020 | Niche Trade Credit Brokers

Credit insurance is a form of risk management where a business can transfer their financial risk to an insurer. With this insurance coverage, businesses are able to protect themselves against the event of a client or customer being unable to pay their debts. This financial protection is ever important in the world of trade where uncertainty and risk is nothing new. The introduction of the new decade has unfortunately, not gone off without a hitch. From the devastating Australian bushfires, to the withdrawal of the United Kingdom from the European Union and the global impacts of the coronavirus outbreak; 2020 has seen a time of incredible social, political, and economic change.

Such uncertainty, especially within the business and trade world, boosts the demand for credit insurance as businesses realise the importance of protecting themselves from the unknown. This need for financial protection due to current events has impacted businesses both within Australia and overseas.

Let’s take a dive into what is happening to the domestic and international credit insurance markets in 2020:

Domestic

There is no denying, Australia has had a tough start to the new decade. From devastating bushfires, mass flooding and now the outbreak of the coronavirus, there has been no shortage of life-altering events. While all these events have impacted countless individuals, businesses are also dealing with the fall-out. Business failures are on the rise and recent studies have shown that Australian businesses are taking a full month longer than average to pay their bills. The reasons for this delay could be due to any of the previously mentioned events, or simply just bad management of cash flow. One thing we do know for certain is that the demand for credit insurance in Australia is on the rise.

Australian businesses are not only affected by events happening down under, they are also subject to the effects of the global economy thanks to international trading including imports and exports. The need for credit insurance when dealing with international businesses has always been important, especially when dealing with countries facing different economic, social and political risks.

The increased economic risks in 2020 have led to many Australians choosing to take advantage of the various financial services available to them and invest in credit insurance.

International

There are countless events happening worldwide which are impacting the global credit insurance market in 2020. Despite some of these events occuring in specific geographical locations, the repercussions affect many other countries. Many of the below events have also impacted the Australian economy and credit insurance market.

Coronavirus

The coronavirus pandemic and the attempts to slow the spread of the virus have been disrupting economic activity globally. Many of the world’s largest economies are presented with risks to their global trade and business operations. As a result of this, the demand of the credit insurance markets has increased rapidly. The global travel restrictions in place have caused disruptions, delays and even bans on production and is resulting in reduced profit margins for retailers globally. The unforeseen outbreak and impacts of the coronavirus have caused many businesses to close and as a result, have left many debts unpaid due to corporate insolvencies. This has caused many businesses to seek out a trade credit insurer to protect their cash flow during these uncertain times.

Due to the global spread of the coronavirus, almost every country and industry in the world has been affected. This global pandemic has highlighted the importance of credit insurance for many businesses, especially those trading internationally.

Trade Wars Between China And America

This feud between the world’s 2 largest economies appears to only be the start of a prolonged trade war. US President Donald Trump has long accused China of unfair trading practises and expressed unwillingness to bend trade rules to China. While these trade wars trigger fears for businesses globally, the trade credit market is set to increase as demand grows.

If the governments implement higher tariffs, it may lead to an increased production cost and ultimately put retailers in a position where they either shrink profit margins or raise prices on consumers. If these added pressures are enough to drive a business to closure, suppliers will be able to cash in on their credit insurance and get reimbursed for any defaulted payments.

A high amount of companies rely on products from tariff-affected countries like China, meaning that any restriction on trade may result in loss of much needed products, services and profit.

Brexit

The exit of the United Kingdom from the European Union has many effects on global trade, especially if a no-deal Brexit is decided on. With country leaders still in discussion surrounding the specific terms of Brexit, the 11 month transition period proves a difficult waiting period for many businesses affected.

If a no-deal Brexit is agreed on, the UK would leave the EU without any trade or law agreements. The implications of this would be huge, not only for the countries directly involved but globally through international trade. The fears of a no-deal Brexit have already boosted the demand in the credit insurance industry. This demand is expected to grow up until a decision has been made regarding new trade agreements. If a no-deal Brexit has been agreed upon, credit insurance will be more important than ever for companies trading internationally.

Trusted Australian Credit Insurance Brokers

With the unique combination of global events already taking place in 2020, the credit insurance market appears to be steady for the long term future. Many businesses trading internationally are choosing not to make any investment decisions without the approval and protection from an insurance broker. As the year unfolds further, business insurers are preparing to cope with the increased demand.

Niche Trade Credit offers a range of different credit insurance options to suit your business’s individual needs. From standard credit insurance services, to export and political risk insurance and other key services, Niche Trade Credit is here to protect your business against financial risk.

Contact our experts to see how you can protect your business and its cashflow today!

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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