Multinationals drive trade credit market growth

Multinational firms are showing an increased appetite for trade credit insurance which is stimulating market growth, according to Marsh head of trade credit UK and Ireland Tim Fisher.

Speaking to StrategicRISK, Fisher said: “There are a number of things driving the growth in the trade credit market. The world is more connected than it ever was, with increased and faster communication. This is giving companies confidence to trade and invest in new markets, with new customers.”

He said one of the key credit risks facing large corporates trading overseas was the recognition of cultural differences in foreign territories.

Fisher said: “There are far more companies trading and operating businesses overseas and selling services to overseas markets, which brings a bit of a challenge because of the obvious cultural differences and the dangers of not really knowing your customer and their ability to pay. 

“If you look at the Mediterranean culture of payment, they expect average payment terms of up to 120 days, whereas Western Europe has traditionally been a 60-day payment term market.”

Combining the impacts of global recession and globalisation has raised the profile of credit insurance and the risk mitigation it can offer to companies to support growth, protect balance sheets and provide confidence in their trading ability, according to Fisher.

In light of the increased purchasing of credit insurance by large multinationals, Marsh has continued to invest in its trade credit practice with the announcement of two key appointments to its UK and Ireland team last week.

Fisher added: “Multinationals have shown the greatest uptick in appetite to purchase trade credit. We are providing advice on far more pan-European and global credit insurance solutions to companies and to a degree we are not chasing these opportunities down, they are approaching us.

“The industry has changed. We at Marsh have been investing heavily in our trade credit practice, which is a global business, and insurers have been doing the same.”