Slowing trade could impact trade credit insurance market

As global trade grinds to a halt, one insurance market is on alert

Insurance News

By Jordan Lynn

Insurers and brokers that deal in trade credit insurance will be on alert as global trade continues to slow down approaching the New Year.

In its Global Economic Outlook, trade credit insurer Atradius noted that global trade is “grinding to a halt” as Brexit and Donald Trump’s election win continue to impact the market.

“Matters for trade are made far worse by political developments,” said John Lorié, global chief economist at Atradius.

“These developments are likely to weigh on future trade data.”

Despite its tag as the fastest growing region in GDP-terms, Asia has seen its trade volumes sink at an accelerated pace in the first half of the year, the report notes, which is driving the global slowdown alongside the flat trade growth in the United States.

In good news for the trade credit market, insolvencies are stabilising but will lean to further increases in the lead up to 2017.

“In 2017, the bankruptcy outlook in developed markets is more balanced with weak growth while insolvencies outlook in EMEs shows mostly increases with some stabilisation as countries emerge from recession,” the report states.

Mark Hoppe, managing director of the Australian branch of Atradius, said that the business has seen an increase in claims over the last year.

“We have had an upward trend in claims and insolvencies in 2016, and we expect that to continue into the first half of 2017,” Hoppe told Insurance Business.

In advanced markets, insolvencies are on track to be flat in 2016 but emerging markets face a rising risk, the report continues.

The report suggests that the decline in trade in Asia is linked to a contraction of Chinese trade alongside a reorganisation of the Chinese economy. Any slow-down in the Chinese economy is worthy of note in the global trade credit market as its impacts can be wide felt.

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