Credit insurance has seen a significant increase in uptake in Australia, particularly over the past six months, according to Atradius.
Mark Hoppe, managing director, Atradius ANZ, said, “Credit insurance is growing as a result of an uncertain market as it plays a significant role in business confidence.”
Atradius has identified the three key factors driving the growth of credit insurance in Australia:
1. Rising interest rates
The increase in bank interest rates has affected consumer confidence and reduced discretionary spend. This has placed pressure on many companies’ cash flow.
Mark Hoppe said, “Insufficient liquidity can stunt business growth. Companies are turning to credit insurers to provide liquid funds and increase cash flow through the business.”
2. China’s slowing economy
The Chinese economy continues to weaken with shares across Asia dropping yet again as the New Year began. As Australia’s biggest trading partner, a slowing Chinese economy has a significant effect on businesses locally, reducing exports for many businesses.
Mark Hoppe said, “Credit insurance frees up businesses to trade more confidently, safe in the knowledge that unpaid debts can be recovered. This can be just the kick-start businesses need to increase their exports.”
3. Increased expansion into new markets
Some businesses are looking to take advantage of the low Australian dollar and move into new markets and industries.
Mark Hoppe said, “When moving into a new market or sector, it’s important to understand whether prospective clients’ stability, creditworthiness, and reputations meet the required standards. Credit insurers can provide this insight and help companies make better-informed strategic business decisions.”