As global economic uncertainty persists — driven by the current U.S.-Israeli conflict with Iran and broader political, economic, and trade tensions — business concerns about nonpayment and customer insolvency are growing. Elevated interest rates and volatile financial conditions are causing a rise in bankruptcies, and prompting businesses to consider purchasing trade credit insurance.
Long viewed as a discretionary, often misunderstood, and sometimes expensive risk management tool, trade credit insurance can serve as a practical safeguard for protecting balance sheets and cash flow. Here’s how businesses can use it to their advantage.
Bankruptcy rates fueling trade credit insurance interest
Economic pressures have been building over several years, but recent data suggest that the economy is now at an inflection point. Nearly 800 U.S. companies filed for bankruptcy in 2025 (opens a new window), more than in any year since 2010, according to data from S&P Global Market Intelligence. (See Figure 1.) S&P’s data includes companies with public debt and at least $2 million in assets or liabilities, along with private companies with at least $10 million in assets or liabilities at the time of filing.
S&P warned that bankruptcy filings “are expected to remain elevated and may rise again in 2026.” The increase in filings highlights growing financial stress across sectors.
Adding to concerns for businesses is the current conflict in the Middle East. Oil prices have already shot up, and a prolonged campaign could further strain personal and corporate finances, leading to additional bankruptcies and insolvencies.
In addition:
Tariffs and geopolitical pressures have contributed to uneven operating conditions, while higher interest rates have increased the cost of capital and tightened corporate liquidity. As financial conditions have become more restrictive, many companies that had navigated earlier pressures finally succumbed to financial strain in 2025.
Over the past six months, strains in the private credit segment have harmed companies in the automotive parts, technology, and vehicle financing sectors. Expectations are that the more high-profile cases engaged in private credit will have a negative ripple/domino effect on other companies. This may only materialize months or years in the future.
All of this is prompting many organizations to reassess how they manage counterparty risk and protect against nonpayment risks.
Significant benefits for policyholders
For suppliers that depend on timely customer payments, these conditions translate directly into heightened credit risk. As a result, interest in trade credit insurance — which protects sellers from nonpayment arising from insolvency, protracted default, or political risks — is growing. While organizations have been cautious about discretionary expenses amid high borrowing costs, the deteriorating credit environment is prompting renewed consideration of this coverage.
Many businesses routinely insure physical assets, yet hesitate to insure receivables that may represent far larger balance sheet exposures. Protecting these invisible assets can offer meaningful benefits to shareholders, particularly where there is concentration risk, which can arise when a small number of customers account for a disproportionately large share of outstanding receivables. For example:
A life sciences company may be owed more than $100 million per month by major drugstores.
A power‑tool manufacturer may have $200 million or more outstanding accounts receivable from retailers.
Companies in media, metals, or other sectors may routinely extend nine‑figure credit to customers despite limited insight into those customers’ financial resilience.
Beyond customer‑level concentration, companies — particularly those with significant exports to specific regions — must also consider concentrated country risks. In addition to providing protection against corporate insolvencies, trade credit insurance can also protect against trade-related political risks, such as the inability to collect payment due to political instability, currency restrictions, or government actions in a buyer’s country. This protection is especially important amid the geopolitical tensions affecting several parts of the world.
Along with the protection available through policies, purchasing trade credit insurance can enable safer sales growth and reduce bad debt reserves on balance sheets, while also allowing policyholders to secure more favorable lending terms. For example, companies that purchase trade credit insurance may be offered larger credit lines or lower interest rates. Policyholders can also benefit from the third-party risk analyses offered by trade credit insurers.
Despite these benefits, trade credit insurance may not be appropriate for every business. Companies engaging in business‑to‑business transactions and that sell on open, unsecured credit terms are the most natural candidates to purchase trade credit insurance. These organizations often carry significant accounts receivable exposures and may be vulnerable to sudden customer insolvency or slow payment. In contrast, business‑to‑consumer companies, such as retailers selling directly to the public, typically do not extend unsecured credit to other firms and therefore may see limited benefit from a traditional trade credit policy.
Building effective insurance programs
Despite rising economic risks, trade credit insurers remain focused on achieving top‑line growth, and the trade credit insurance market remains highly competitive.
More than a dozen insurers now offer meaningful trade credit insurance capacity, giving buyers a range of options. While insurers recognize that loss activity could increase if bankruptcies continue to rise, loss ratios to date have remained manageable. As a result, carriers are actively pursuing new business. Many are taking a flexible approach to underwriting, offering creative program structures, and negotiating terms based on broader insurer relationships.
Any company considering coverage or reassessing an existing program should work with its insurance broker to:
Conduct a thorough risk assessment of accounts receivable. This should include identifying concentration risk, country risk, and potential indirect exposures. A company unaffected by tariffs, for example, may still be vulnerable if its customers’ customers face tariff‑related disruptions. These domino effects have already played out in sectors such as metals and aluminum.
Identify which receivables require insurance and which do not. Trade credit insurance does not mandate that all accounts be insured. Flexibility is a defining feature of today’s market: Insurers are often willing to exclude strong, low‑risk customers to help reduce premiums.
Leverage existing insurer relationships. Some major credit insurance carriers write multiple commercial insurance lines. Existing relationships with these insurers can lead to more favorable credit insurance terms as part of a broader partnership.
Consider the value of related forms of coverage. One such form is political risk insurance, which can provide coverage for a company’s assets and/or investments on foreign soil from various political and economic risks, including confiscation, expropriation, and nationalization — for example, a foreign government’s seizure of a policyholder’s operating company in that government’s country.
For more information about trade credit insurance, contact a member of your Lockton team.