What 2025 holds for the Trade Credit Insurance Industry

For most of us, 2024 was the first year when we actually used AI in our daily jobs. There is no doubt it holds the prospect to help the credit insurance industry work more accurately and efficiently, while taking away some of the non productive drudgery from our daily lives. One of the best quotes of the year was: ‘Some people are worried that AI will take over their job. However the bigger risk is that another human who uses AI more effectively than you will take over your job.’ If you haven’t yet started integrating AI into your processes, 2025 is a good time to start. At SCHUMANN we have a range of AI applications under our ‘ALEVA’ brand, and would be happy to discuss AI based solutions with members of the trade credit community.

Of course new technology always brings new risks as well as benefits. 2024 was the year when the first major attempt to regulate AI was made (see the EU’s Artificial Intelligence Act, effective 1 August 2024). Every company should consider having and updating an AI Policy as regulation develops. If in doubt where to start, your favourite AI App will provide a first draft for you to build on. 

New technology is disruptive and often brings heightened credit risk volatility in its wake. The ‘dot com’ boom and bust of the early 2000s was a good example, and created plenty of high profile claims for credit insurers to deal with. The emergence of the new AI app from China’s ‘DeepSeek’ is a good example of such turbulence. For risk underwriters, judging the valuations and credit risk of AI companies will be a challenge in 2025. Perhaps a bubble might burst again, as it did in 2002. 

One of the things technology has brought us is a more diverse trade credit market. Twenty five years ago, after a wave of consolidation, the market was dominated by just three remaining private trade credit insurers, and they had close to 100% market share. Technology represented a formidable entrance barrier. Now, in 2025, there are more than 20 private short term credit insurers, and the list is getting ever longer. It has been interesting to see the increasing popularity of the MGA model, and we expect to see further new entrants in 2025 as well. This diversity of supply helps create a fully functioning competitive market eco system, and is much to be welcomed. SCHUMANN is always ready to assist new organisations entering the trade credit market. 

The trade credit community as a whole has delivered excellent underwriting results in recent years, and this is one of the reasons that new capital and new entrants keep joining the market. It is hard to believe that our last very serious crisis was 17 years ago, back in 2008. However, this does present a challenge as the memory of that event passes further into history. The number of underwriters and leaders who were active during 2008/9 is obviously diminishing. We also need to face the prospect that the extent of Government support for the financial markets in coming years may not continue at the levels we saw following 2008, and during the Covid pandemic. Ongoing caution is warranted.

Perhaps 2025 will be the year when we need to brush up our political risk underwriting skills. Before 1989 it felt as if political risk was everywhere, and underwriters were well used to adding non financial factors (like, how loyal is the owner of this company to the Head of State?) into their credit risk analysis. Human nature does not change, and it feels as if political risk factors are once again becoming more and more significant across all markets, including those in the West. This will serve to maintain demand for the product, and will no doubt make underwriting even more interesting as well. 

Trade credit insurance is still a discretionary purchase, and we would all like to see a greater level of penetration. It is encouraging to see market participants continually innovating and coming up with new ideas. One market segment which remains underserved is the SMEs. The cost of distributing and providing the product to SMEs has always been a challenge. There is a role for technology in streamlining processes and making SME business more viable. Let us hope that further progress will be made in this direction in 2025.

Finally, SCHUMANN would like to take this opportunity to wish all companies involved in the trade credit sector a successful and profitable 2025!