Rate predictions
| Trend | Range | |
|---|---|---|
| Better risks |  |
-5% to -10% |
| Poor risks |  |
Flat to +10% |
Key takeaway
The trade credit market is softening. Given the lack of forecasted COVID-19 losses, rates are dropping on average of 5% to 10% and in some cases more for pristine deals.
The tsunami of pandemic-related losses never arrived.
- The predicted trade credit losses never occurred, though insurers remain concerned that the discontinuation of government stimulus could result in increased claims.
- Insurer loss ratios are much lower after loss reserve releases, which has created a strong bottom-line position for many insurers.
- Premium rates are softening thanks to not only negligible losses but also lower policy retentions due to self-insurance.
Key carriers have exited the trade credit marketplace.
- The impact of two major departures in particular will impact market capacity, but the extent of that impact remains to be seen. Over $20 billion of credit limit capacity is being removed from the market, so pricing may ultimately be affected significantly.
- Remaining insurers are jockeying for the portfolios of these markets.
- The movement of bank programs will depend on the capacity and appetite of new prospective insurers.
The collapse of Greensill Capital will impact monetization programs.
- The rapid failure of the supply chain financial services company is almost certain to result in regulatory changes on disclosure and insurer retraction against asset managers.
Conditions are improving.
- Rates are softening and will likely continue in this direction into 2022.
- Insurer appetite for most sectors has returned to pre-COVID-19 positions.
- Insurers are still conservative, however, in their approach to sectors most heavily impacted by COVID-19 (i.e., airlines).
