The global credit insurance market has reached a turning point. After three consecutive years of strong recovery following the Covid 19 downturn, new data suggests that growth has stalled, raising deeper questions about the future direction of the industry.
A recent survey conducted by the International Association of Credit Portfolio Managers and the International Trade and Forfaiting Association shows that total exposure covered by credit insurance stood at 191.5 billion dollars in June 2025.
This figure was only marginally higher than the 191 billion dollars recorded at the end of 2024. While technically an increase, the minimal change effectively signals the end of a robust expansion phase that began in 2021 when exposure had dropped to 126 billion dollars.
For many market participants, this pause is not just a temporary dip. It may signal the beginning of a structural shift driven largely by regulatory changes in Europe.
Basel 3.1 Alters the Playing Field
The introduction of Basel 3.1 capital requirement reforms in the European Union appears to be reshaping how large banks approach credit insurance. Often referred to as Basel 4, the framework reduces the amount of regulatory capital relief banks can obtain by insuring loans. For institutions that rely on the internal ratings based approach to calculate credit risk, the economics of credit insurance have changed significantly.
Richard Wulff, executive director of the International Credit Insurance and Surety Association, explained that usage patterns have shifted. “The banks that have been using credit risk mitigation are still using it, but for different purposes and to a lesser extent, and that is purely the result of the European legislation,” he said.
Jean Maurice Elkouby, a member of the insurance committee at the International Trade and Forfaiting Association, described the trend as an early regulatory impact. “It’s a bit early days to conclude, really, but it was on such a strong growth path, it seems that it’s linked to Basel. And we know anecdotally that large banks have changed their buying behaviour,” he noted.
These comments highlight a market adjusting to new rules rather than abandoning credit insurance entirely.
Transaction Volumes Reflect Cooling Momentum
Beyond total exposure figures, transaction volumes also indicate a cooling market. The survey showed that the total transaction amount facilitated by credit insurance declined from 455 billion dollars in 2024 to 440 billion dollars in June 2025.
While the drop is not dramatic, it reinforces the narrative of moderation. Banks are becoming more selective, especially in a period marked by pricing pressure on corporate lending. Chris Hall, head of financial institution sales at broker WTW, observed that pricing has become tighter. “I think pricing has come in, and I think that it’s not stopping business, but it’s meaning that people are having to be more thoughtful,” he said.
This more cautious approach reflects broader economic realities. Lenders are balancing profitability, regulatory capital, and risk appetite more carefully than before.
Smaller Banks Remain Active
Interestingly, the slowdown is not uniform across the industry. Smaller banks that follow the standardised approach to risk calculations appear less affected by Basel 3.1. Many of these institutions continue to use credit insurance actively to expand lending capacity and participate in larger transactions.
Charlie Radcliffe, chief commercial officer at broker BPL, cautioned that the survey may not fully capture activity among newer users. He suggested that growth in more complex and higher priced transactions remains strong in certain segments.
Chris Hall also noted that smaller banks view credit insurance as a way to compete more effectively. By using insurance as a form of syndication, they can take on larger deals and strengthen relationships with clients.
This divergence between large and smaller banks underscores the idea that the market is evolving rather than contracting outright.
A Transitional Moment for the Industry
The IACPM survey of 46 banks reveals a sector in transition. Perception of regulatory capital relief as an obstacle to using credit insurance has risen noticeably in recent years. That shift reflects the diminished incentive under Basel 3.1 and suggests that large European banks may continue to scale back their reliance on insurance for capital optimisation.
Yet optimism persists. Credit insurance remains vital for managing trade finance exposures, project finance debt, revolving credit facilities, and term loans to large corporates. For banks operating across borders or in specialised sectors, the product continues to serve as an essential risk management tool.
Ultimately, the current slowdown may represent recalibration rather than decline. As regulatory frameworks evolve and market participants adapt, credit insurance is likely to retain its relevance, albeit in a reshaped form.
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