Reinsurance capacity backing the trade credit and surety insurance market, extremely sensitive to the economic cycle and prone to sudden withdrawal in a downturn.
Trade credit and surety reinsurance carries the risk of insurers specialized in trade credit insurance, described in its direct-insurance form by the dedicated entry, which indemnifies a supplier left unpaid by a customer that has become insolvent, and in surety, which guarantees performance of a contractual obligation. This reinsurance market has a feature underwriters dread: its loss experience is strongly procyclical, staying low during growth and then exploding abruptly at an economic downturn, which pushes reinsurers to pull capacity precisely when direct insurers need it most, worsening the contraction of trade credit between businesses. In March 2020, at the very start of the Covid-19 pandemic, the leading credit reinsurers sharply cut their capacity limits toward the market's major trade credit insurers, Allianz Trade, Atradius and Coface, threatening to strip the economy of trade credit capacity judged essential to keeping supply chains running. Facing that risk, the UK government announced in June 2020 a temporary public reinsurance scheme worth roughly ten billion pounds sterling, backstopping trade credit insurers operating in the UK so they would maintain rather than cut their cover limits to businesses, a scheme other European states echoed in similar form that same year.
In March 2020, credit reinsurers sharply cut capacity toward Allianz Trade, Atradius and Coface; the UK government responds in June 2020 with a public reinsurance scheme worth roughly ten billion pounds to keep cover limits to businesses in place.
trade credit reinsurance, réassurance de la caution, réassurance crédit fournisseurs