TCI expected to thrive amidst global economic slowdown and geopolitical flux: Swiss Re
In a world marked by economic uncertainty and geopolitical tensions, trade credit insurance (TCI) is emerging as a crucial stabiliser of economic resilience, according to a report by the Swiss Re Institute. The study forecasts that TCI is set to grow despite a slowdown in global trade flows, driven by increasing demand and higher premium rates. The report predicts that global TCI premiums will increase by approximately 6%, reaching an estimated $14.1 billion in 2023 and $14.8 billion in 2024. This growth is primarily attributed to rising premium rates. The current economic slowdown, combined with geopolitical risks, is expected to result in elevated counterparty risks. TCI serves as a safeguard for sellers against non-payment risks, particularly due to buyer insolvency or bankruptcy, the report noted. As the world experiences shifts in trade patterns, characterised by the signing of new regional, multilateral, and bilateral trade agreements, supply chains are becoming increasingly complex, especially for intermediate goods. This complexity is likely to boost the demand for TCI. The report notes a move towards a multi-polar world where advanced market manufacturers are reshoring or friend-shoring production operations. This shift, coupled with the rise of multiple supply chains and the relocation of production facilities, contributes to trade fragmentation. The share of intermediate goods in world trade has fallen, and this trend necessitates enhanced counterparty risk management. New regional and bilateral trade agreements are expected to lead to trade resource reallocation, fostering trade creation and thereby increasing the demand for both TCI and credit surety insurance. For instance, the Regional Comprehensive Economic Agreement (RCEP) is projected to boost credit and surety insurance premiums across the Asia Pacific region by approximately 4.4% in 2030.
