We don’t hear terms like unprecedented as often in 2025 as we did in previous years, and most businesses are relieved. Since 2020, companies have faced many significant challenges, some of which still have lasting effects; credit risk being one of them. However, that period was largely characterised by low insolvency rates and lower than average claims.
Over the past year, credit risk conditions have been tending toward a more familiar phase and common cycle. While insolvencies and claims have increased, rather than constantly reacting and adapting changing and immediate issues, we now have an opportunity to consider longer-term objectives, including our management of risk.
Due to the period of below-average claims and strong competition between insurers, businesses considering trade credit insurance now are still likely to secure excellent premium rates well below the long-term average, along with highly beneficial policy conditions. Renewal policy holders have the same opportunities and both, very importantly, can often lock-in gains we negotiate now, often for two and in some cases three years.
This is good news for both prospects and established clients, especially as they navigate cost pressures alongside slow or stagnant sales growth. It’s likely no coincidence, of course, that the return to long-term insolvency levels has at the same time been steady and consistent.
In some sectors – construction, accommodation & food, general and other services and manufacturing as noted below – it has accelerated in the past twelve months. And total insolvencies reached record levels in late 2024.
As insolvencies wash through into claims and insurers’ loss ratios, premium rates will harden. Given the current, competitive state of the trade credit insurance market, there may in fact be a sharp correction if insolvencies and claims continue their current trajectory, particularly during the seasonal peak in the lead up to the end of the financial year.
Now is the time to assess your risk appetite and lock in coverage before the next stage of the credit insurance cycle takes effect. History has shown that longer-term policies help businesses avoid widespread cost increases and tightening policy conditions.
When considering a multi-year policy, it’s essential to align it with your broader business objectives. Are you focused on minimising costs while maintaining protection against major losses? Or do you prioritise maintaining stable costs while securing better policy conditions that support sales growth? Most businesses aim for a balance between these two, but we encourage clients to take a growth-focused, return-on-investment approach—because, as always, the cycle will turn again.
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