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Trade Credit Insurance in Europe

  • December 2015
  • -
  • Finaccord
  • -
  • 235 pages

Trade Credit Insurance in Europe is a report about the market for trade credit cover in ten countries: Austria; Belgium; France; Germany; Italy; the Netherlands; Poland; Spain; Switzerland; and the UK. In addition to documenting the development of the market value in each country from 2010 to 2014, the report also divides it for 2015 according to six key segmentations:

- between small customers with an annual turnover of less than EUR 5 million and larger insured entities with a turnover above this threshold;

- between single-risk and annual policies;

- between export and domestic trade credit insurance;

- for export trade credit insurance alone, between protection acquired for political risks and cover bought for business risks;

- between business underwritten by domestic insurers and that dealt with by underwriters based outside of the country in question and with no branch in it;

- and between business intermediated by brokers and that underwritten directly.

These unique market splits are based in part on a survey of leading brokers and underwriters of trade credit insurance in each country. This same survey also quantifies the degree to which underwriters of this type of cover are utilised by brokers on a regular basis, gives an input into Finaccord's estimates for the market shares of underwriters which are expressed as a likely percentage range (e.g. 5.0% to 7.5%), highlights the most important brokers of trade credit insurance in each country, provides a basis for commentary surrounding distribution channels used for this type of policy, and informs Finaccord's forecasts for the market value in each country through to 2018.

Key findings from the executive summary of this report include:

- gross written premiums for trade credit insurance across these ten countries increased from around EUR 3.90 billion in 2010 to around EUR 3.97 billion in 2014 representing a compound annual growth rate of 0.5% in nominal terms;

- nevertheless, while the market value might appear to be stagnant at an overall level, this masks some important dynamics that appear to be occurring within it;

- for example, across the ten countries combined, it is estimated that the value of the market for single risk policies may have expanded by more than 70% between 2013 and 2015;

- furthermore, premiums for export trade credit insurance are likely to have moved up by more than 20% over the same period of time with the value attributable to cover for political risks rising by almost 40%;

- in addition, there is evidence to suggest that the market shares of the leading trio – namely, Atradius, Coface and Euler Hermes – are being gently eroded which is likely to be partly a consequence of growing demand for alternative products such as single risk and political risk policies.

Table Of Contents

Trade Credit Insurance in Europe
TABLE OF CONTENTS
00 EXECUTIVE SUMMARY 1
10 INTRODUCTION 4
What is this report about? 4
Rationale 4
Several factors underpin the rationale for the production of this study 4
There are several distribution channel options in addition to brokers 4
Globally, trade credit insurers cover over EUR 22 trillion of commercial credit exposures 4
The report provides a standardised analysis of important metrics across ten countries 5
Methodology 5
Research program 5
Market data analysis 5
Definitions 6
Trade credit insurance 6
Single risk and annual policies 6
Export and domestic policies 7
Political and business risks 7
Premiums 7
Abbreviations 7
Exchange rate 8
PartnerBASE 8
Finaccord 10
20 EUROPEAN OVERVIEW 11
Introduction 11
Market size and growth 12
Value of premiums 12
The value of premiums was just below EUR 4 billion across the ten European markets in 2014 12
Seven of the ten countries saw premiums grow in nominal terms between 2010 and 2014 13
Premiums as a percentage of GDP 14
Austria and Spain have the most developed markets for trade credit insurance relative to GDP 14
The market for factoring is outpacing that for trade credit insurance a majority of countries 15
There is often a clear relationship between the relative market values of trade credit insurance and factoring 16
Market segmentation 17
Segmentation by annual turnover of insured company 17
The proportion of the total market due to smaller customers has increased in five out of ten countries… 17
… reaching a maximum value in Spain 19
Segmentation between annual and single risk policies 22
Single situation cover is most significant in Switzerland and least so in Poland… 22
… and its value is likely to have increased by over 70% between 2013 and 2015 23
Segmentation between domestic and export trade credit insurance 25
The relative importance of export trade credit insurance is rising in most countries… 25
… and both segments record maximum values in Germany 27
The value of export trade credit cover is quite strongly related to the importance of exports in each country 29
Segmentation between business and political risk cover 30
Acquiring cover for political risks is of most importance to clients in Germany and Switzerland… 30
… and the value of cover bought is likely to be rising in seven of the ten countries investigated 32

Segmentation between domestic and non-domestic underwriters 34
In all but one country, a small proportion of the total market is placed with non-domestic underwriters… 34
… with the highest value of such business deriving from France 36
Distribution channels 38
Segmentation between broker-intermediated and directly-underwritten business 38
Brokers constitute the main distribution channel in all countries other than one… 38
… and intermediated around EUR 236 billion in trade credit insurance premiums in 2015 40
Affinity schemes with major banks and trade associations 42
Almost a third of major banks serving business customers are also distributors of trade credit insurance 42
with a slightly higher rate of involvement visible among leading trade associations 43
among which those in Italy are most likely to run an affinity scheme for this product 43
Underwriter utilisation by brokers and market shares 45
More than 20 different underwriting groups work on a regular basis with brokers in at least one country 45
among which insurers belonging to Credendo are used most commonly behind the big three groups… 45
although there are over 40 competing groups in total, including many specialist underwriters 45
Apart from the three market leaders, three insurers are used by brokers in six or more countries… 47
… although a few are limited to operations in just one country 47
Atradius, Coface and Euler Hermes together hold 70% or more of the market in eight of the ten nations 49
albeit their combined market share appears to have fallen in recent years… 49
… meaning that other competitors are likely to account for more than EUR 900 million in premiums 49
Future outlook 51
Across the ten countries combined, the market value is expected to reach EUR 422 billion by 2018… 51
… albeit it is likely to contract in both nominal and real terms in two countries 52
30 AUSTRIA 55
Introduction 55
Economic situation 55
Market size, growth and segmentation 56
The value of Austria's trade credit insurance market has fluctuated in recent years… 56
… with more of it attributable to smaller customers in 2015 than in 2013… 57
… and with acquisition of single risk cover having risen quite significantly in popularity 58
Export trade credit insurance accounts for a large proportion of the total market 59
driven by the fact that exports account for more than 40% of Austrian GDP 60
The value of political risk cover acquired by Austrian customers has also been growing 61
While the vast majority of business is dealt with by underwriters based in Austria itself 62
and a narrow majority of it is intermediated by brokers 63
Factoring as a complementary / substitute product 64
The small factoring market doubled in value between 2010 and 2014 64
Underwriter utilisation by brokers and market shares 65
Austrian brokers tend to utilise a very limited range of underwriters for trade credit insurance… 65
with Acredia clearly the market leader by a comfortable margin 66
Distribution channels 68
Among brokers, 3 Banken Versicherungsmakler and Aon are probable market leaders 68
A number of banks intermediate trade credit cover but trade associations are not involved 68
Future outlook 70
Trade credit insurance premiums in Austria are likely to record a moderate rise up to 2018 70
40 BELGIUM 71
Introduction 71
Economic situation 71
Key regulations 71
Market size, growth and segmentation 72
Progress in Belgium's trade credit insurance market has been uneven in recent years… 72
… with the loss ratio having increased quite appreciably 72
A significant proportion of the market is due to smaller clients with annual turnover below EUR 5 million 74
Single risk policies have grown slightly in importance in Belgium in recent years 75
Export trade credit insurance accounts for a very substantial proportion of the total market 76
which is logical given the importance of exports to Belgium's economy 77
Cover bought for political risks accounts for an increasing proportion of the total market 78
Underwriters based outside of Belgium account for a fairly significant proportion of the market… 79
as does directly-underwritten (as opposed to broker-intermediated) business 80
Factoring as a complementary / substitute product 81
The value of Belgium's factoring market has advanced at a consistent rate in recent years 81
Underwriter utilisation by brokers and market shares 82
Four underwriters are used regularly by all or the vast majority of brokers of trade credit insurance… 82
albeit competitors outside of the leading quartet account for between 12% and 18% of the total market 83
Distribution channels 85
… with significant merger and acquisition activity having occurred in recent times 85
Several of Belgium's largest banks act as distributors of trade credit insurance… 86
… as do a number of trade associations 87
Future outlook 88
The value of the Belgian trade credit insurance market is likely to contract in both nominal and real terms 88
50 FRANCE 89
Introduction 89
Economic situation 89
Key regulations 89
Market size, growth and segmentation 90
The French market for trade credit insurance has fallen back somewhat in value in recent years… 90
although its aggregate profitability hit a seven-year high in 2014 90
A growing proportion of the total market value is attributable to larger customers… 91
… with the importance of single risk policies also having risen sharply 93
Export trade credit insurance now makes up almost 40% of the overall market value… 94
although exports only account for just over 20% of French GDP 95
Insurance bought to cover political risks has apparently been subject to a slight decline 96
Management of state export guarantees is being transferred to Bpifrance 96
The vast majority of business is dealt with by underwriters based in France itself… 97
and with a clear majority intermediated by brokers as opposed to being underwritten directly 98
Factoring as a complementary / substitute product 99
France's market for factoring expanded by almost 50% between 2010 and 2014 99
Underwriter utilisation by brokers and market shares 100
No insurer is used by all brokers surveyed but three are by close to 90% of them 100
The market share of Euler Hermes is likely to lie in a range from 44% to 52% 101
Equinox Global is believed to be making some headway against the market-leading quintet 101
Distribution channels 104
AU (Assurance Universelle) is the leading broker of trade credit cover, probably followed by Aon 104
A few of the largest French banks act as distributors of trade credit insurance… 104
… as do a number of trade associations… 105
… such as the Confederation Generale des Petites et Moyennes Entreprises 105
Future outlook 107
Modest growth is forecast for the French trade credit insurance market up to 2018 107
60 GERMANY 108
Introduction 108
Economic situation 108
Key regulations 109
Market size, growth and segmentation 109
Germany's trade credit insurance market is the largest in Europe 109
Corporate insolvencies have fallen in recent years 109
The proportion of the total market value due to smaller companies has fallen since 2013… 110
… while single risk policies are believed to have risen slightly in importance 112
Export trade credit insurance accounts for an increasing proportion of the total market 113
driven by the fact that exports account for more than 40% of German GDP 114
Cover for political risks accounts for a growing proportion of the market for export trade credit cover 115
The vast majority of business is underwritten by insurers based in Germany itself… 116
although the split between directly underwritten cover and broker-intermediated business is closer 117
Factoring as a complementary / substitute product 118
Germany's market for factoring has experienced robust growth in recent years 118
Underwriter utilisation by brokers and market shares 119
Five underwriters are utilised on a regular basis by more than 60% of brokers active in this arena… 119
… with Euler Hermes the clear market leader ahead of Atradius and Coface 119
Distribution channels 122
The agents of SIGNAL IDUNA act as distributors of trade credit policies underwritten by R+V 122
in a market in which there are many brokers with a significant presence in this arena 122
among which Aon is the market leader with over 100 staff focused on trade credit cover 122
Trade credit insurance is promoted by several of Germany's largest banks… 123
… and also by a number of trade associations… 123
… including the Bundesverband des Deutschen Groß- und Außenhandels 123
Future outlook 125
The value of export trade credit insurance is likely to rise albeit the overall market value will stagnate 125
70 ITALY 126
Introduction 126
Economic situation 126
Market size, growth and segmentation 126
Italy's market for trade credit insurance has delivered little growth since 2011… 126
… with premiums related to new policies as a percentage of total premiums having fallen slightly 127
An increasing proportion of the market is likely to be due to larger customers… 128
… with cover bought to cover single risks having risen somewhat 129
Demand for export trade credit insurance in Italy has apparently been increasing rapidly… 130
driven by the fact that exports account for more than 25% of Italian GDP… 131
… and with cover bought for political risks likely to have become more important in this market 132
A significant proportion of business is dealt with by underwriters based outside of Italy… 133
and most is underwritten directly by insurers (including business arriving via their agents) 134
Factoring as a complementary / substitute product 135
Growth trends in the factoring market have mirrored those in trade credit insurance 135
Underwriter utilisation by brokers and market shares 136
All brokers surveyed report making use of two underwriters of trade credit insurance… 136
… and these are the ones that are dominant in the analysis of market shares 137
SACE BT has implemented a more cautious underwriting policy in recent years 137
Distribution channels 139
Around one third of the total market value is distributed by brokers… 139
among which Aon is likely to be the market leader 139
Several of Italy's largest banks act as distributors of trade credit insurance… 140
… and cover is also quite widely sold by trade associations… 141
… all of which work directly with underwriters (as opposed to using brokers) 141
Future outlook 142
The value of Italy's trade credit market will grow up to 2018, but at a fairly modest rate 142
80 NETHERLANDS 143
Introduction 143
Economic situation 143
Market size, growth and segmentation 144
The Dutch trade credit insurance market has grown at a consistent rate in recent years 144
The proportion of the total market value due to smaller companies has changed little since 2013… 145
… but single risk policies have risen somewhat in importance 146
Export trade credit insurance accounts for a clearly majority of the total market value… 147
driven by the fact that exports account for 80% of Dutch GDP 148
Cover for political risks makes up a growing proportion of the market for export trade credit cover 149
The vast majority of business is underwritten by insurers based in the Netherlands itself… 150
and over 80% of it is intermediated by brokers 151
Factoring as a complementary / substitute product 152
The Dutch factoring market expanded significantly between 2010 and 2014 152
Underwriter utilisation by brokers and market shares 153
At least ten underwriters are active in the Dutch market for trade credit insurance… 153
… with Atradius the clear market leader 154
Euler Hermes has boosted its position by taking full control of Interpolis Kredietverzekeringen 154
Distribution channels 156
Aon and MEVAS are likely to be the leading brokers of trade credit cover in the Netherlands 156
Just one major Dutch bank has a clear arrangement for distributing trade credit insurance… 157
… albeit a number of trade associations are active in this field… 158
… usually collaborating directly with underwriters (as opposed to working with brokers) 158
Future outlook 160
Modest growth is predicted for Dutch trade credit insurance premiums 160
90 POLAND 161
Introduction 161
Economic situation 161
Market size, growth and segmentation 162
The value of the Polish trade credit insurance market has fluctuated in recent years 162
The proportion of the total market value due to smaller companies has changed little since 2013… 163
… and single risk policies appear to have decreased slightly in importance 164
The proportion of the total market value due to export trade credit insurance has moved up a little… 165
helped by the fact that exports account for an increasing proportion of Polish GDP 166
The value of cover bought for business risks greatly outweighs that bought for political risks 167
The vast majority of business is underwritten by insurers based in Poland itself… 168
although the split between directly-underwritten and broker-intermediated cover is closer 169
Factoring as a complementary / substitute product 170
Poland's market for factoring has experienced strong and consistent growth in recent years 170
Underwriter utilisation by brokers and market shares 171
Four underwriters are utilised on a regular basis by more than 75% of brokers researched… 171
… with Euler Hermes the clear market leader 172
Distribution channels 174
Numerous brokers compete in the Polish market for trade credit insurance… 174
among which Aon, Marsh and RiskMan are likely sector leaders 174
The role of banks and trade associations in distributing trade credit insurance is very limited 175
Future outlook 176
Several factors should bring about a rise in the value of trade credit insurance premiums by 2018 176
100 SPAIN 177
Introduction 177
Economic situation 177
Key regulations 177
Market size, growth and segmentation 178
Although it has declined sharply in recent years, Spain's market for this type of cover remains large… 178
… and there has been extreme volatility in the claims ratio 178
The split of the market value by size of insured company has changed little since 2013… 179
… but single risk policies have grown quite significantly in importance… 181
… as has export trade credit insurance… 182
with the latter having been boosted by a substantial rise in exports 183
Within export trade credit insurance, the percentage of premiums due to political risk cover has fallen 184
The Spanish government has announced that it will delay the sale of its majority stake in CESCE 184
A significant proportion of Spanish trade credit risks are underwritten by insurers outside of Spain… 186
… and close to 40% of the market value is underwritten directly by insurers 187
Factoring as a complementary / substitute product 188
The value of Spain's factoring market has retreated from a high point reached in 2012 188
Underwriter utilisation by brokers and market shares 189
Credito y Caución and Solunion are used by all brokers of trade credit insurance in Spain 189
The leading four insurers control up to 90% of the total market value… 190
… albeit smaller competitors appear to have been eroding this figure 190
Distribution channels 193
CESCE, Coface and Solunion obtain less of their business via brokers than Credito y Caución 193
Among brokers, Aon, Marsh and Willis have the largest teams dedicated to trade credit insurance 193
Several of Spain's largest banks act as distributors of trade credit insurance 193
A handful of trade associations are active in the intermediation of trade credit insurance in Spain 195
with several brokers holding relationships in this arena… 195
… and with CESCE the most frequently named underwriter 195
Future outlook 197
The decline in the Spanish trade credit insurance market is expected to reverse from 2016 onwards… 197
… as a result of a number of factors 197
110 SWITZERLAND 199
Introduction 199
Economic situation 199
Market size, growth and segmentation 200
The value of the Swiss trade credit insurance market is likely to have peaked in 2012… 200
… which is when corporate insolvencies in the country also reached their highest level 200
Larger companies buying trade credit cover account for a rising proportion of the total market… 201
… and the importance of single risk policies has increased significantly in recent years… 202
… as has export (as opposed to domestic) trade credit insurance 203
Exports account for a very substantial proportion of total Swiss GDP 204
Insurance acquired to cover political risks grew in importance between 2013 and 2015 205
Swiss law dictates that all business can be classified as being handled by domestic underwriters… 206
and a majority of it is intermediated by brokers (as opposed to being underwritten directly) 207
Factoring as a complementary / substitute product 208
The trend in the factoring market has been more or less exactly opposite to that for trade credit insurance 208
Underwriter utilisation by brokers and market shares 209
Six underwriters are utilised on a regular basis by 50% or more of brokers active in this arena… 209
… and five of these are likely to claim a market share of at least 10% 210
Distribution channels 212
With one exception, Swiss banks are not involved in the intermediation of trade credit insurance… 213
Future outlook 215
A modest rise is predicted for the value of the trade credit insurance market through to 2018 215
120 UK 216
Introduction 216
Economic situation 216
Key regulations 216
Market size, growth and segmentation 217
In real terms, the value of the UK market for trade credit insurance slipped back between 2010 and 2014… 217
… with the number of corporate insolvencies also having declined 217
The value of cover sold to smaller customers may have increased between 2013 and 2015… 219
… although there has been little apparent change in the weight of single risk policies within the total market 220
Demand for export trade credit insurance seems to have tapered off… 221
partly as a consequence of a decline in underlying exports in 2014 222
The proportion of the export trade credit insurance market due to political risk cover has remained stable 223
The overwhelming majority of business is dealt with by underwriters based in the UK itself… 224
and brokers dominate distribution albeit direct sales are not insignificant 225
Factoring as a complementary / substitute product 226
The value of the UK factoring market expanded by over 50% between 2010 and 2014 226
Underwriter utilisation by brokers and market shares 227
On average, brokers of trade credit cover work on a regular basis within between six and seven insurers… 227
… and seven underwriters are utilised in this manner by more than 60% of brokers surveyed 227
Although not especially large, the UK market for trade credit insurance is comparatively fragmented 228
Distribution channels 231
Numerous brokers compete in the UK trade credit insurance market… 231
… including more than a dozen that are entirely or mainly focused on this field 231
Among banks, only HSBC has a clearly articulated distribution agreement for trade credit insurance… 232
… although many trade associations offer it… 233
… utilising a variety of operating models for this purpose 233
Future outlook 235
A number of factors threaten to limit growth in the market value through to 2018 235

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