Navigating uncertainty: The rise of bespoke solutions in the MBTC market

In a year of global elections and escalating geopolitical tensions, the multi-buyer trade credit (MBTC) market could be on the precipice of change. Even when considering the COVID-19 pandemic and its aftershocks, the trade credit insurance (TCI) market has for years remained relatively benign, with claims remaining at reasonably low levels. However, some signs indicate that this might not last. 

Against this changing geopolitical and, consequently, macroeconomic backdrop, the market is maturing, and businesses are seeking increasingly bespoke MBTC solutions, tailored to their unique needs.

This evolving landscape prompts a closer examination of both the forces at play and the shifts taking place within the industry. Looking ahead, what is driving the current unpredictability, and how are more bespoke, adaptable solutions playing a part?

Uncertainties ahead in the MBTC market

Currently, heightened geopolitical risk remains a critical factor affecting international trade, encompassing a range of different challenges from territorial disputes to political uncertainty and sanctions. These risks have the potential to disrupt supply chains and impact market stability, complicating financial cross-border transactions.

The upcoming U.S. elections serve as a timely reminder of the pivotal role political leadership can play in driving market uncertainty. If former President Donald Trump returns to office, for example, this could have an inevitable knock-on effect on international trade. Trump’s previous tenure was marked by significant trade policy shifts, including the imposition of tariffs on Chinese goods and renegotiation of trade agreements – given that trade tariffs and other protectionist measures have the potential to drive significant volatility, there is a likelihood of renewed trade tensions and market instability. 

Likewise, in the Asia-Pacific region, changing dynamics would not only disrupt regional stability but also have a profound impact on global supply chains, particularly in the technology sector. As the region is a major producer of semiconductors, any disruption to production capabilities could exacerbate an already protracted global chip shortage. This, in turn, could affect a multitude of industries reliant on these components – from the automotive sector to consumer electronics and beyond.

Adding to geopolitical tensions, the market is becoming increasingly nervous due to maturing COVID-era debts, as many corporates – particularly those with weaker credit profiles – face significant debt maturities in 2025/26. Coupled with the heightened risk environment, maturing debts could lead to significant instability for these companies, potentially triggering a wave of claims in the TCI market. 

Solutions for a volatile world

Brokers and insureds alike must recognise that, while the TCI market has avoided severe downturns in recent history, it may soon encounter a shift towards a harder market environment. As businesses accustomed to favourable conditions face new challenges, insurers must retain a deep understanding of their needs to provide not only resilience, but also solutions tailored to their unique risks in an increasingly complex global landscape. 

In this context, bespoke MBTC solutions are becoming more critical. Designed to address the specific risk profiles and operational contexts of individual organisations, these solutions begin with a comprehensive risk assessment, evaluating the specific health, credit risk, and operational vulnerabilities of the business. This involves analysing the company’s customer base, industry sector and geographic exposure, for example, to identify potential risks. By continually adapting policies to respond to ongoing and emerging risks, insurers can offer more robust and responsive coverage in an unpredictable world.

Based on the risk assessment, insurers can then create customised coverage plans that address the unique needs of the business. This might involve setting specific credit limits, including or excluding certain risks, and providing flexible terms and conditions that align with the business's operational needs. 

In response to the increasing complexity and size of corporate risks, for example, syndication and co-insurance are becoming more prevalent beyond the UK. This trend is particularly notable in large corporate and bank accounts receivable (AR) purchase programs further afield, across Europe, North America, and Asia, and involves spreading the risk across multiple insurers, allowing for greater capacity and stability. 

By having multiple carriers on a programme, businesses are able to secure larger line sizes and mitigate the impact of capacity reductions by any single insurer. 

Ultimately, as the market continues to evolve, the ability to provide bespoke solutions will be a key differentiator for leading insurers, enabling them to meet the diverse needs of their clients effectively. In an uncertain world, insurers can provide certainty; and buffer the global economy from shocks.