Insolvency risk for New Zealand businesses is rising as geopolitical tensions intersect with a subdued domestic recovery, according to Coface New Zealand. The trade credit insurer says these dynamics are sharpening the focus on how brokers assess and advise on credit exposures across their client portfolios. Speaking with Insurance Business New Zealand, Coface New Zealand commercial director David Meys (pictured) said that, despite some easing in inflation and signs of stabilisation, local conditions leave limited room for further shocks. “New Zealand’s economic recovery remains fragile. While inflation has eased from its peak and activity is slowly stabilising, the margin for error is thin. Against this backdrop, escalating geopolitical tensions – particularly in the Middle East – represent a material risk to both local economic stability and business solvency,” Meys said.
Meys said New Zealand’s distance from the Middle East does not insulate firms that depend on global demand, trade credit arrangements, or long supply chains. “For insurance brokers advising clients exposed to trade credit, supply chains, or working capital pressure, this is not a distant or theoretical risk. Insolvencies globally are already running at post GFC highs, and history shows that periods of geopolitical disruption are often the trigger that turns financial stress into outright default,” Meys said. He added that the key task for brokers is not to anticipate every geopolitical scenario, but to show clients how relatively small disruptions can interact with existing financial pressures. “When insolvencies are already elevated, you don’t need a major event to create failures. You just need something that pushes costs higher, delays cash inflows, or disrupts supply- geopolitics does all three,” he said.
Coface economist Apolline Greiveldinger identified energy markets as a primary link between Middle East tensions and New Zealand’s real economy, given the country’s fuel mix and import patterns. She noted that oil products account for nearly half of New Zealand’s total energy consumption and that recent structural changes have altered how that risk is managed domestically. “New Zealand still produces crude oil, but all of it is exported. That means our fuel resilience now depends entirely on global refining and shipping routes,” Greiveldinger said.
Since the closure of the country’s last refinery in 2022, New Zealand has relied fully on imports of refined product. More than 80% of those imports come from South Korea and Singapore, both of which depend heavily on Middle Eastern crude. Greiveldinger said this creates a clear channel through which disruptions in that region could affect domestic fuel prices. “As a net oil importer, New Zealand is highly exposed to rising fuel costs. That pushes inflation higher, weighs on household confidence, and puts pressure on business margins. If these pressures persist, the risk of a stagflationary environment increases. That’s where higher inflation coincides with weak growth- raising questions over how long the Reserve Bank can sustain an accommodative stance,” Greiveldinger said.
From an insurance perspective, Greiveldinger said the most immediate impact is often seen in payment behaviour rather than in headline macro data. “Higher fuel costs don’t usually cause an immediate collapse. What they do is steadily erode cash flow, especially in sectors where costs can’t be passed on quickly. That’s when payment delays start to appear-and once payment behaviour changes, credit risk escalates fast,” she said.
Against this backdrop, Meys said brokers are likely to place greater emphasis on monitoring shifts in trade credit and counterparty risk as part of their regular discussions with clients. “Vigilance is no longer optional, it’s central to prudent advice. Brokers are well positioned to spot pressure building across various sectors and specific businesses, whether it’s through buyer concentration, extended payment terms, or growing reliance on a narrow set of suppliers,” Meys said.
Meys noted that some businesses may still rely on past performance or a “she’ll be right” mindset when assessing whether to protect receivables or adjust credit terms. He adds that brokers should be wary of relying too heavily on the ‘she’ll be right’ attitude from clients based on a reluctance to take up a new area of cover. Meys also highlighted the gap that can emerge between reported financials and current trading conditions, particularly in sectors facing higher input costs and uneven demand. “Balance sheets from 12 or even six months ago can now paint a very different picture to what a business is dealing with today. In a volatile environment, risks change faster than reporting cycles, and brokers should be providing clients options to cover credit risk annually,” he said. The comments from Coface reflect a broader shift toward integrating geopolitical developments, energy market dynamics, and payment behaviour trends into ongoing credit assessments, renewal discussions, and the calibration of trade credit protections in exposed industries.
