Credit and surety reinsurance capacity is plentiful heading into the January 1 renewals. But insurers face a tougher economic backdrop, with rising insolvencies, energy price shocks and volatile trade policy, according to Willis Re.
The reinsurance broker’s October market view on credit, surety and political risk said reinsurers enter the renewal with record capital. Property catastrophe pricing is softening, so spare capital is flowing into specialty lines. Buyers have the advantage, it said, but reinsurers will be selective about who gets the best terms.
Trade credit remains profitable, with loss ratios returning towards their long-term average after the exceptionally low claims of 2021 to 2023. Claims frequency has picked up and is almost back to normal. Willis Re described that as a healthy return, with a small number of large losses having the biggest impact on treaty results.
Trade policy is a key watch point for exporters. The US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act in February. A temporary Section 122 surcharge followed, and Section 232 and 301 tariffs now carry the load. Willis Re said refunds and rerouting are bringing both relief and disruption.
The US–China tariff truce has been extended to January 10, 2027, just after the renewals.
Willis Re described the economic backdrop as the toughest in years. Shipping through the Strait of Hormuz remains severely disrupted, and Brent crude is around US$110 a barrel. US 10-year Treasury yields hit 5.31% on October 5. Allianz Trade and Coface both forecast global insolvencies to rise 6% in 2026, the fifth consecutive annual increase. Construction, chemicals, retail and transport are most at risk.
Data centres are emerging as a major exposure across credit and surety. Many projects are financed through special-purpose vehicles, which can hide the tenant or sponsor behind the obligor. A single project can also generate exposure across credit, surety, property, construction and cyber cover at once.
Willis Re expects reinsurers to focus on data centre exposure, large-loss history including fraud in receivables finance, concentrations in stressed sovereigns, and how portfolios are positioned for rising insolvencies.
For Canadian credit insurers and their brokers, the combination of US trade policy swings, high energy costs and rising rates points to more stress among buyers, particularly in sectors exposed to cross-border trade. Clean portfolio data and clear exposure to vulnerable sectors will be key to securing favourable terms at renewal.
For surety writers, Willis Re expects reinsurers to keep supporting the class but to differentiate by cedent. Price increases will largely be limited to programs that have had losses. Contractors working on large projects, including data centres, may find bond capacity more closely scrutinised.
