As the Global economic indicators remain strong, the level of corporate insolvencies has been limited in 2017 and will remain contained in 2018. This obviously benefits the profitability of the Trade Credit Insurers. However, the number of major insolvencies (companies with T/O above EUR 50 M) has increased significantly every quarter in 2017 in Western Europe and Asia, causing larger impact in their ecosystem (unemployment, financial costs, etc).
On the other hand, intense competition among all the insurers and the low claim level, have driven prices down, especially in western Europe, pushing insurers to seek growth in riskier markets.
In 2018, like the previous year, the unstable macro-economic environment and the rise of country risk, will continue to encourage protectionism and local instabilities; this might influence corporates to secure their growth through TCI (Trade Credit Insurance) programmes.
Investment in technology remains very important and a driver for future growth. Most of the players in the industry identify “digitalisation” as an opportunity to deliver faster decisions and to optimise cost, bringing automation in processes. This has resulted in partnership with Insurtechs, Fintechs, designing new products, exploring IA, Big Data and Blockchain.
With a global growth rate reaching 3.8% in 2017 (a level not reached since 2011) and low inflation, the improvement of the economic environment in 2017 has led to a lower level of insolvencies. This has enhanced an intense pricing competition among the insurers.
This negative impact on insurers’ sales, has been compensated by an increase in the turnover of their policyholders. In this regard Coface and Euler Hermes sales at constant scope has remain stable this year versus 2016.
For the fourth year in a row Atradius posted the best growth among the “big three”, with a performance this year of +5.1% at constant scope and currency.
After 5 years of constant growth in Net Profit After Tax, Atradius has posted a result of €186M, slightly lower than in 2016 (€212M. In 2017, Coface’s profitability has doubled from €42M in 2016 to €83M, result of the restructuring plans. Euler Hermes profit at €315M is not only the highest of the industry, but the highest for EH since 2011.
The attached study describes all the ratio of the industry in 2017, and explore the main challenges that the insurers will face in 2018.