ICISA Industry Performance 2023 Explained – Trade Finance Global

Estimated reading time: 7 minutes

The International Credit Insurance and Surety Association (ICISA) has released its 2023 industry results, highlighting key trends and developments in the trade credit and surety insurance markets.

ICISA represents 95% of the world’s private credit insurance business, insuring almost €3.2 trillion of trade receivables and underwriting billions in infrastructure.

Trade Finance Global discusses the report’s findings in detail and provides insights, speaking exclusively to Richard Wulff, Executive Director of ICISA.

ICISA plays a key role in supporting global trade and economic development.

Bringing together the world’s leading insurance and credit surety companies, ICISA provides protection for trade receivables and guarantees construction and service projects around the world.

The association serves as a safe haven for trade and investment, providing security and stability in the face of economic uncertainty.

Key takeaways from 2023 industry results

Industry results for 2023 reveal several important trends:

• The most important information:
  • Insured exposure increased by 7.7%, reaching EUR 1.4 trillion.
  • Premiums written increased by 8.9% to EUR 6.9 billion.
  • Compensations paid increased by 68.5%, reaching a total amount of EUR 2 billion.
  • The increase in written premiums reflects the increased demand for sureties that guarantee the implementation of construction and infrastructure projects. The increase in insured exposure indicates wider market acceptance and reliance on surety products to mitigate risk in these sectors​​​ (ICISA)​.

• The most important information regarding trade credit insurance:
  • Insured exposure increased by 4.5%, reaching a total amount of EUR 3.2 trillion.
  • Premiums written increased by 5% and amounted to EUR 8.2 billion.
  • Compensations paid increased by 11.4%, reaching EUR 3.2 billion.
  • The increase in trade credit insurance exposures and premiums highlights the key role of these products in protecting businesses against the risk of non-payment, ensuring liquidity and financial stability​ (ICISA).

Sureties play a key role in guaranteeing project completion and protecting against contractor default.

The increase in surety claims paid, which increased by 68.5% to €2 billion, highlights the difficult economic conditions currently faced by contractors and other principals. At the same time, it highlights the value that sureties bring to the economy by limiting losses in the event of insolvency.

Similarly, the trade credit insurance sector has seen significant growth, reflecting businesses’ need for protection in uncertain times.

Trade credit insurance protects businesses against the risk of buyer default by ensuring that suppliers will receive payment even if the buyer defaults.

This insurance is crucial to maintaining financial liquidity and enabling companies to provide their customers with more favorable credit terms.

The increase in both insured exposure and claims on both the TCI and surety markets clearly shows the challenge we face in an economic environment in which insolvencies are more common. Strongly capitalized and stable TCI and surety markets are essential for economic resilience in such periods (ICISA).

The impact of macroeconomic factors

The global economic landscape, characterized by high interest rates, rising costs, energy transition and geopolitical tensions, will significantly impact the trade credit insurance market in 2023.

Wulff said: “There is no doubt that customer awareness of risk has increased. The risk of insolvency has increased particularly over the last few years, leading to a sharp increase in the number of business failures across the OECD. This has many causes, such as interest rate increases and supply chain disruptions due to political events (exports from Ukraine, the Israel-Hamas conflict on the Red Sea routes, etc.). This brought attention to our industry and our professionalism in underwriting risks for the benefit of our clients.

Technological innovations in trade credit insurance

The development of “Insurtech”, including artificial intelligence and digital platforms, has transformed the trade credit insurance industry, improving risk assessment and operational efficiency.

Wulff said: “We see impacts on both the product/distribution side and internal processes. The first category includes initiatives related to insuring activities conducted on B2B platforms. Incorporating artificial intelligence into insurance and claims processes fits into the second approach. The sector will continue to evolve in line with the availability of new technologies to optimize coverage and speed to serve customers in the best possible way.

Environmental and social governance (ESG) initiatives.

ICISA members are increasingly integrating ESG principles into their activities, reflecting the growing awareness of sustainability in financial services.

Wulff said: “Sustainability principles are embedded and deeply embedded in our members’ businesses. From underwriting guidelines (which sectors to promote and which to avoid) to investment practices. And it’s not just about the impact on the environment. ICISA members are aware of the need to monitor human rights, governance and social issues within the value chain in which they are involved.

It cannot be underestimated that acting responsibly also influences the attractiveness of our industry for new talents. Our members’ younger workers, in particular, demand action from their employers to act responsibly and improve our society. These employees are essential to our members because they have the current skill set necessary to continually innovate.”

Challenges on the surety market

The surety market faces challenges such as regulatory hurdles and fluctuations in market demand. ICISA members actively address these issues to maintain market stability.

Addressing the current challenges facing the surety market, Wulff said: “The inflationary pressures we have seen have had a serious impact on the spending base of contractors, who constitute the core customer base of our sureties. This had an impact on the prices of construction materials, as well as wages and the overall availability of labor.

“This has weakened the balance sheets of many contractors, making them more vulnerable to negative situations in which they can no longer fulfill their contract obligations. Our members have worked tirelessly to find solutions that are acceptable to the bond beneficiary (who wants the work performed). In the longer term, especially in Europe, many regulatory, political and economic factors limit the ability to start new construction projects. This is to the detriment of the construction sector, as well as society in general, such as those looking for an affordable place to live.”

Prospects for the future of trade credit insurance

Looking ahead, the trade credit insurance market is poised for growth, driven by emerging markets and technological advancements. However, potential risks still exist, requiring constant innovation and adaptation.

Wulff said: “We are very optimistic about the future. Our members have demonstrated resilience and the ability to serve their clients in a rapidly changing environment. Risks will remain and will arise from time to time, but this is what we do best. This is the reason we exist – reducing risk and helping clients recover from loss events.”

Women in trade credit insurance

ICISA has launched the Women’s Surety Network and Women in Credit Insurance initiatives, reflecting its commitment to diversity and inclusion in the industry.

These programs aim to support and promote women in the field, promoting a more inclusive industry environment.

How will industry initiatives actually impact gender diversity? Wulff said: “Attracting and retaining talent in our industry is critical to its growth and ability to deliver maximum value to both customers and shareholders. Talent homogeneity leads to suboptimal results. Gender diversity initiatives like WICI and WSN are part of this solution. We see our members employing diverse talent and these initiatives support them.”

ICISA welcomed three new members: Export-Import Bank of Thai, Interamerican and RenaissanceRe.

These additions strengthen the ICISA network and enhance its ability to support global trade and investment:

• Export-Import Bank of Thailand: Plays a key role in driving Thailand’s trade and investment strategy.
• Interamerican: A leading insurance company in Greece, enriching our network with experience from the Greek and neighboring surety markets.
• RenaissanceRe: Based in Bermuda, expands ICISA’s expertise with a focus on innovative approaches to risk management and financial solutions (ICISA).

Supporting the global economy

Despite economic challenges, ICISA members continue to provide vital support to the global economy.

The increase in trade credit insurance exposure and surety claims paid reflects the industry’s resilience and its critical role in mitigating risk, providing liquidity and supporting economic stability.

ICISA’s 2023 industry results highlight the key role of credit and surety insurance in facilitating global trade.

As the industry addresses economic challenges and adopts technological innovations, ICISA members remain committed to supporting economic development around the world.