Credit insurance provides companies with coverage for outstanding commercial receivables, protecting against risk of buyer default or insolvency. In addition to managing credit risk, credit insurance supports financing needs: by reducing the risk of non-payment of trade receivables, a firm can borrow at lower interest rates. This sigma defines credit insurance, compares it to traditional competing products and explains its role in supporting the operations of a company's trade credit department. It also explores the market size and growth of credit insurance, analyses the impact of the internet on credit insurance and discusses the outlook for credit insurers.
Historically, credit insurance has been more popular in Europe than elsewhere. Private trade credit insurance premiums amount to USD 4.2 billion worldwide, with 84% of that in Europe, or USD 3.5 billion. Annual premium growth in Europe has averaged about 5% over the last 10 years, keeping pace with economic growth. In the United States, premium growth has been more rapid lately, about 10% per year, but from a smaller base—US premiums are only about USD 0.5 billion, or 12%, of worldwide premiums. Given the low penetration of credit insurance in the US market, premium growth is expected to remain strong.