Asian Trade Credit Insurance Rates May Soon Rise

Time is quickly running out to obtain favorably priced and widely available trade credit insurance in Asia, said Marsh insurance brokerage.

“Trade credit insurance across Asia is in a much healthier position compared to Europe and the U.S., with relatively low prices and good availability of cover from local underwriters,” said Richard Green, head of Marsh's trade credit and political risk practice in Asia, in a statement.

“However, we see the market tightening with rates increasing and capacity shrinking in the fourth quarter of this year. This means businesses should secure their trade credit cover sooner rather than later,” he said.

Trade credit insurance helps companies manage the risk of customers' insolvency or payment default. It enables companies to trade on non-secure payment terms for account receivables, making them a more attractive trading partner for buyers.

From a buyer's perspective, it is better to transact with a supplier on an open account basis rather than have to provide a letter of credit or bank guarantee. Trade credit insurance allows suppliers to offer unsecured payment terms without taking on increased risk.

“At the moment, we are seeing a window of opportunity for clients, especially for Asian businesses dealing within Asia. The intra-Asian trade continues to be more favorable while companies dealing with European or U.S. counterparts will have more trouble securing trade credit insurance,” said Mr. Green.

“We have seen an increase in claims costs, which means it's only a matter of time before the premiums increase to reflect this,” he continued. Companies should take advantage of the 'sweet spot' the market is currently in.”