As global insolvencies reach a 15-year high in 2024, the food and beverage (F&B) industry stands out as a resilient sector benefiting from robust trade credit insurance support. Despite economic challenges such as inflation, higher interest rates, and energy price volatility, F&B businesses have found solace in trade credit insurers who help mitigate financial risks.
According to Allianz Trade, major economies including the US, Canada, France, and Japan have witnessed a significant 30% increase in insolvencies. This trend is expected to continue, projecting a further 10% rise in 2024, marking the fourth consecutive year of escalating business insolvencies.
“The critical role of trade credit insurance in managing financial risks is underscored by these developments,” stated WTW in their analysis titled “The Critical Role of Trade Credit Insurance in the Food and Drink Sector.”
However, challenges such as capacity issues in heavily insured segments like wholesalers and grocers have surfaced, prompting adaptations in insurance policies. Trends such as non-cancellable credit limits and enhanced policyholder discretion are gaining traction, alongside an increase in top-up providers offering extended coverage and higher limits.
Furthermore, trade credit insurance is increasingly recognized as a strategic growth tool in the F&B industry. It enables businesses to gain a competitive advantage by expanding into new markets and sectors while mitigating financial risks.
“In addition to managing credit risk and ensuring financial stability, trade credit insurance supports supply chain finance programs through early settlement options based on purchaser financial strength,” highlighted WTW.
The insurance also plays a crucial role in facilitating international transactions by safeguarding against losses in unfamiliar markets and supporting financing activities.
“Businesses benefit significantly from the ability of trade credit insurance to boost sales and manage capacity,” noted WTW. “It provides the confidence to extend credit to new customers and pursue larger sales volumes without compromising risk exposure. Moreover, the flexibility to adjust credit limits and obtain additional coverage supports businesses in capturing growth opportunities and expanding market share.”
Furthermore, trade credit insurance policies often include collection services, aiding businesses in recovering outstanding debts before resorting to claims.
In conclusion, amidst rising global insolvencies and economic uncertainties, trade credit insurance emerges as a cornerstone of financial stability for the F&B sector, enabling businesses to navigate challenges and capitalize on growth opportunities with confidence.
