Recent Downgrades in Eurozone Increases Non-Payment Risk for Suppliers; Companies Seeking Greater Protection from Buyer Default
Asian suppliers are becoming increasingly worried about the creditworthiness of their trading partners’ in Europe and the US, sparking increased interest in using trade credit insurance to protect their trade receivables.
Marsh, a global leader in insurance broking and risk management, has seen a significant rise in requests for trade credit insurance quotes over past the three months compared to the same period last year, with interest up 30% and 20% in Singapore and Hong Kong respectively.
To help clients in Asia, Marsh has developed a regional trade credit insurance facility with a leading trade credit insurer specifically for small-to-medium sized enterprises. These are the companies most at risk for cash flow issues resulting from buyer default owing to reduced balance sheet strength and less ability to withstand financial shocks.
“Economic worries, particularly in Europe, are causing Asian suppliers to reassess the ability of their customers to pay,” said Richard Green, Head of Marsh’s Trade Credit and Political Risk Practice in Asia. “In response, companies are increasingly looking at trade credit insurance to protect cash flow.
“Given the environment, the trade credit insurance is market tightening with rates increasing in response to the poor macro-economic conditions in the Europe and the US. Our trade credit facility is one way we’re helping clients in Asia protect their revenue streams.”
With Asia being the engine for much of the world’s manufacturing output, the ability for its trading partners to pay — and the payment terms on which they transact — are critical for companies in the region. Trade credit insurance helps companies manage the risk of customers’ insolvency or payment default. It enables companies to trade on non-secure payment terms for account receivables, making them a more attractive trading partner for buyers.