The trade credit re/insurance sector moves in step with the broader economy, shaped by the fundamental laws of supply and demand. It plays a critical—systemic—role in maintaining global market stability. Yet, its procyclical nature makes it vulnerable to shocks caused by a financial crisis, dramatic geopolitical developments, or even technological shifts. In extreme cases, governments and multilateral agencies may need to intervene as insurers of last resort to prevent the credit insurance equivalent of a bank run. Historically, trade credit re/insurance has helped stabilize the global economy. But today, that safety net may be weaker: governments are far more indebted, trade is more politicized, and multilateral cooperation is under strain. So how do we prepare for the next (inevitable) crisis?
This article explores the rhythm of risk in the trade credit re/insurance market. We consider lessons from historic crises, examine current warning signs and consider how the contemporary global political economy may shape the next downturn. Importantly, we conclude with thoughts for industry actors on how to navigate uncertainty with agility and resilience.
The trade credit insurance market is a critical component of the global economy. Businesses look to trade credit insurance providers to protect against non-payment by buyers for reasons ranging from payment delays to insolvencies and political risk events. It also allows companies to offer credit terms without bearing all the risk. Insurers in turn partner with the reinsurance market to manage their portfolios. By pooling and redistributing risk, reinsurers support the capacity of primary insurers to write new business. They act, in effect, as shock absorbers by drawing on capital that is international in scope and diversified across markets and lines of business. Reinsurers therefore contribute to market stability. This function is particularly vital in times of crisis when liquidity is constrained, potentially leading to increased defaults and risk of losses.
In addition to the procyclical nature of the market, the trade credit re/insurance sector features a number of its own dynamics. During periods of economic growth claims tend to be low and competition among insurers and reinsurers intensifies. The chase for market share often leads to rapid expansion and softer pricing. When the economic cycle turns, the consequences of these actions become apparent. Corporate defaults start to rise triggering an increase in claims. At this point in the cycle, the sector becomes more risk-averse and the pendulum swings back toward caution and capital preservation. Finally, it is worth noting that—while both insurers and reinsurers are ultimately exposed to the same perils—the two portfolios have a different duration. Trade credit insurers will notice late payments providing them with an early warning mechanism, allowing them to reduce or cancel buyers’ credit limit in a matter of days. Reinsurers, however, are generally bound to 12-month agreements (or longer) and thus lack the capacity to react to sudden market movements, making a forward-looking approach all the more important.
In a normal economic cycle such ebbs and flows in demand and supply are managed by the market mechanism. But when a shock occurs, perhaps due to a financial crisis or other geopolitical developments, claims can dramatically surge, liquidity drains away and coverage becomes harder to secure as capacity is managed. This raises the risk of a far more severe and systemic shock to the global economy. As seen below, this risk has, in previous crises, prompted governments and multilateral agencies to take action. A key question today is whether a fresh crisis would elicit a similar response.
The 2008 global financial crisis was a critical test for the trade credit re/insurance sector. In the years leading up to the crash, the market experienced significant expansion. Capital was plentiful, competition was fierce and underwriters took a more generous approach to their risk appetite in order to remain relevant in such a soft market.
However, the collapse of Lehman Brothers in September 2008 resulted in a wave of corporate insolvencies and a dramatic spike in trade credit insurance claims. This led primary insurers to tighten their underwriting, raise premiums and reduce coverage across sectors. Businesses that relied on trade credit insurance to support exports experienced reduced or, in extreme cases, zeroed capacity. Premiums were also increased to reflect market risk levels. As the crisis deepened, reinsurers rapidly reassessed their exposures and began to withdraw capacity from the market.
Governments were forced to step in to prevent the sector, and the broader economy, from seizing up entirely. The United Kingdom, for instance, launched the Trade Credit Insurance Top-up Scheme (TCITS) in May 2009, allowing businesses whose credit insurance had been reduced to purchase government-backed top-up cover, maintaining their ability to trade on credit terms. Others, such as Singapore, subsidized a portion of insurance premiums for eligible companies and made additional trade credit insurance capacity available through top-up arrangements. Overall, the G20 provided liquidity amounting to USD 2.5 trillion through export credit agencies.
The crisis delivered several lessons. First, it exposed how easily risk can be mispriced in stable environments, particularly when growth is prioritized over resilience. Second, it highlighted the importance of maintaining underwriting discipline even during economic upswings. Finally, it revealed the limitations of reinsurance structures that lacked flexibility to respond to sudden, systemic stress. In response, many reinsurers and insurers adopted more conservative approaches in the wake of the crisis, with an increased emphasis on diversification and contingency planning. A decade later, another shock tested the system in a very different way.
The COVID-19 pandemic posed a severe test for the trade credit re/insurance ecosystem, with early fears of mass defaults and claims. Reinsurers pulled back and insurers reassessed exposures, but large-scale government interventions—stimulus, wage support, furloughs, and credit guarantees—averted a crisis. The EU alone mobilized EUR 3.27 trillion, including EUR 227 billion for credit insurance schemes[1]. Research by ICISA[2] found these government-backed schemes crucial in maintaining confidence and preventing insolvencies. While some sectors saw higher claims, overall losses were muted, and the stop-loss mechanisms provided by public guarantees even delivered one of the market’s best years for loss ratios—an outcome that proved more profitable for the public insurance schemes than initially expected.
Even so, the pandemic exposed structural weaknesses in global supply chains and demonstrated how quickly sectoral vulnerabilities can become systemic. It also accelerated geopolitical shifts including a move toward economic nationalism and friend-shoring. These trends have created a more fragmented global risk landscape, where exposures are more dispersed and harder to model using historical data.
For reinsurers, the pandemic underscored the importance of agile capacity management, real-time monitoring and forward-looking scenario planning. The sector has also taken note of how geopolitical developments—from trade wars to the growing use of geoeconomic tools—can rapidly alter the risk profile of entire regions or industries. As trade patterns shift in response to the emerging world order, new risks and opportunities will emerge for trade credit re/insurers.
In both crises, the trade credit re/insurance sector was placed under extreme pressure which was relieved through extraordinary government intervention. Given current fiscal conditions and the tense geopolitical environment, can we be sure of a similar response today should a crisis of a similar scale erupt tomorrow? And considering the heavy impact on both retained premium and profit that those public schemes had on the whole industry, will (re)insurers be willing to adhere to similar guarantee schemes again, or will they rather rely on some sort of (free) implicit public support?
It is becoming increasingly clear that the global economy (globalization) is entering a new and more contested phase. Many of the assumptions that underpinned globalization in recent decades are now challenged or outright rejected. Trade, for example, is increasingly politicized and subject to geo-economic measures (e.g. tariffs, export controls, sanctions) as the existing model of multilateralism, exemplified by the World Trade Organization (WTO), faces mounting challenges. The resurgence of industrial policy in the US, Europe and Japan (among others), often in the name of economic security, further interjects the state into domains previously left to the market. The dramatic increase in announced discriminatory trade and industrial policy changes is captured in Figure 1.
Total Reported Discriminatory Trade & Industrial Policy Changes
Figure 1: Source: Global Trade Alert
Consequently, geopolitical risk – the potential for political, economic or security events arising between nations or blocs to disrupt operations and markets—is high, as is policy uncertainty. Current forecasts project slower growth in 2025 and 2026 in response to this fraught macroeconomic and geopolitical context and downside risks abound.
Global trade is highly exposed in this environment. The WTO[3] forecasts global merchandise trade to grow at only 0.9% in 2025 (down from 2.9% in 2024) due, predominately, to the effect of tariff hikes by the US. Additionally, tariff-induced inflation is a major risk to the US economic outlook. The weighted average tariff rate on all US imports is now around 18%, the highest level since the 1930s. While the impact of tariffs has so far been muted due to various tactical responses by importers and manufacturers – frontloading of goods before the application of higher rates, and a willingness to absorb cost increases in the margin, for instance – tariff-induced price increases are now showing up in the data as higher costs are increasingly passed onto consumers.
Figure 2: Sources: OECD, IMF, World Bank, WTO
As states and markets adjust to a new trade landscape shaped by geopolitics, protectionist policies and higher tariffs, new trade patterns and opportunities will emerge. For now, however, business sentiment is understandably cautious which also weighs on capital expenditure – although with the notable exception of investment in AI infrastructure.
What are the implications of this pivotal moment for trade credit re/insurance actors and how can they prepare for and navigate an increasingly uncertain future?
The emergence of a new world order is accompanied by increased geopolitical tension, risk and uncertainty. In this dynamic environment it is prudent to consider the extent to which existing models and approaches remain relevant and also the ways in which to prepare for the next shock.
Reflecting on the lessons of previous periods of stress or turmoil is a good starting point. For most, the global financial crisis and the Covid pandemic emerged seemingly from nowhere and at a rapid pace, leaving states and markets struggling to catch up. Ultimately, these shocks were countered by massive injections of public funds to stabilize specific sectors and the broader economy. The financial crisis highlighted the risk of easy credit, weak oversight, excessive complexity and financial interconnectedness. It was regarded as a ‘black swan’ event – highly unpredictable and causing great impact. The pandemic, on the other hand, is more accurately described as a ‘grey rhino’ event – a probable and high impact event; in other words, something which should have been featured in probable risk scenarios. Both events offered hard lessons in the value of resilience and agility.
In the current period of uncertainty as to the direction and nature of the next stage of globalization, many companies are in ‘wait and see’ mode. This, however, should not be an excuse for doing nothing. Indeed, the companies that take this period as an opportunity to control what they can, will be best placed to weather the next (inevitable) storm.
The use of foresight tools such as scenario analysis or simulations, for example, offers an opportunity to create competing visions of the future and then pose the ‘what if’ questions. What if governments are unable or unwilling to step in next time? What if liquidity dries up more rapidly than currently expected? Such an approach also allows for the stress testing of existing assumptions, models and structures. Moreover, these exercises offer insights into how resilient and agile the business or sector is and where there are areas to improve.
Building multiple and competing visions of the future is not an attempt at prediction. Rather, doing so builds the institutional mindset and forward leaning stance required to effectively anticipate emerging risks, stress-test capital adequacy, improve underwriting discipline and deepen cross-functional communication, while avoiding overreactions to unusual market movements but also overconfidence during positive business cycles. Finally, given the critical nature of the trade credit re/insurance sector, undertaking these exercises with partners and clients can deepen understanding, strengthen trust and reinforce relationships across the ecosystem.
It is also important to note that while the total balance sheets of trade credit insurance actors are exposed to their own cycles and shocks, these are not correlated to most of the systemic shocks that the broader insurance industry faces. In this way, trade credit (re)insurance provides a much-needed portfolio diversification, helping to stabilize the bottom lines of companies and making the product a capital-efficient way to support growth and profit through different cycles.
Trade Credit Insurance, though niche within property & casualty insurance, plays a vital role for businesses and the broader economy. Its resilience through economic cycles and systemic crises has provided insurers and reinsurers with good through-the-cycle margins. However, strong performance can lead to overconfidence and create a soft market. Unlike other P&C lines, Trade Credit Insurance is not just a risk mitigation tool, it is a business enabler. A sudden market hardening could occur ahead of a downturn, leaving companies without sufficient credit limits, which is why reliable, stable and expert trade credit re/insurers are essential to the global economic ecosystem.
It might seem simplistic, but good underwriting is the answer: proactive limit management, sector analysis and a diversified portfolio are proven tools. They allow us to support companies during uncertain times while protecting our own bottom line
As a market leading reinsurer with a strong balance sheet and a committed shareholder, PartnerRe understands markets and product cycles. We have a strong, multiline portfolio to help our clients – especially those focused on trade credit – to benefit from our diversification, and our two decades of experience in the trade credit sector equip us to be more than just a capital provider. But this business is more than a large balance sheet. Our team is made up of industry experts with a long track record spanning different markets, geographies and sectors, enabling us to be thought leaders in the space.
We offer more than reinsurance capacity to our insurance partners. We support their strategy, we listen to and challenge their assumptions and plans. Our goal is shared: to create a more resilient environment for companies to successfully trade, and for re/insurers to write a profitable, sustainable business.
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Contributor
Piergiorgio D’Ignazio, Global Product Leader, Credit and Political Risk, PartnerRe
References
[1] Trade and Trade Finance in the 2008-09 Financial Crisis. IMF Working Paper 11/16, (2010)
[2] Credit Insurance Schemes – What would have happened without them? International Credit Insurance & Surety Association, (2021)