A Study of the Credit Insurance Market
With minimal growth being experienced in Western Europe, the credit insurance market is now considered to be “mature” in the region which was the birthplace for this type of insurance. However, there is growth, notably in Asia and the Americas, where the insurers are experiencing promising performances. This specialist insurance market is dominated by three players which represent 80% of the market for short-term credit insurance: Euler Hermes (35.7%) followed by Atradius (24.5%) and Coface (19%). Other credit insurers are more focused in a sector of activity, in a geographical area or write a specific insurance structure such as Excess of Loss or Single Situation.
The premium income of the leading insurers in 2014 has been adversely impacted by the slowdown in sales of their policyholders (which reduces the base for calculating the premium). By managing their costs and better risk control resulting in fewer claims, the insurers have been able to maintain their profitability. Net profitability has stabilised in recent years allowing them to rebuild their capital bases which were eroded during the 2008/2009 financial crisis. The profits of Euler Hermes have remained constant at approx. €300M for the past 5 years, whereas those of Coface and Atradius are approx. €125M and €160M respectively. The strengthening of equity since the crisis and their level of capital is adequate for the risks they write and satisfy the European Solvency 2 regulations.
The major rating agencies continue to monitor these insurers which provide important support to economic development. Originally created to avoid the risk of a chain reaction (domino effect), credit insurers today play a leading role in the global economy; they secure transactions on credit terms which remain the primary source of business financing.
International expansion is the growth driver for most businesses in the industrialised countries. Many of these business view credit insurance as a simple and inexpensive way to support them in the development and management of this sales development.