Allianz Trade Highlights Need for Risk Management in Light of Forecasted Increase in Global Insolvencies

Allianz Trade Highlights Need for Risk Management in Light of Forecasted Increase in Global Insolvencies

(IN BRIEF) Allianz Trade, the world’s leading trade credit insurer, has released its Global Insolvency Report, predicting a +21% increase in global insolvencies in 2023 and a further +4% rise in 2024. The report warns that prolonged pressure on profitability, weaker cash buffers, and tighter financial conditions are driving the increase, and that the most vulnerable companies will be the most affected. While the majority of countries are expected to exceed their pre-pandemic insolvency levels by the end of 2024, half of the countries in Allianz Trade’s panel may exceed their pre-pandemic levels in 2023. The report highlights the importance of companies taking proactive measures to manage their risks and mitigate potential losses.

(PRESS RELEASE) PARIS, 11-Apr-2023 — /EuropaWire/ — Allianz Group (ETR: ALV), one of the leading integrated financial services providers worldwide, announces that Allianz Trade, the world’s leading trade credit insurer, has announced the release of its Global Insolvency Report, revealing that global insolvencies are set to rise by +21% in 2023 and +4% in 2024, following a small rebound of +2% in 2022. The report warns that prolonged pressure on profitability, weaker cash buffers, and tighter financial conditions are driving the increase, and that the most fragile companies will be the hardest hit.

Allianz Trade’s report also indicates that half of the countries in its panel are expected to see insolvencies exceed their pre-pandemic levels in 2023, with three out of five countries reaching that point in 2024. Although global insolvency levels may not reach their 2019 levels by 2024, the majority of countries are predicted to exceed their pre-pandemic levels by the end of that year.

“Inside Europe, we expect the number of insolvencies to reach 59,000 in France in 2023 (+41% y/y), 28,500 in the UK (+16%), 17,800 in Germany (+22%) and 8,900 in Italy (+24%). In the US, we expect an increase of +49% in 2023 as a result of tighter credit conditions and an expected sharp economic slowdown, which would mean a return to 20,000+ insolvencies per year. In Asia, China should see a moderate increase (+4%) as the re-opening has not eliminated all risks, notably in the real estate sector”, illustrates Maxime Lemerle, Lead Analyst for Insolvency Research at Allianz Trade.

Allianz Trade highlights the recent disruptions in the banking sector in Europe and the U.S. as raising concerns about the potential impact of a credit crunch on business insolvencies.

“We calculate that the Eurozone and the US would need respectively 1.3pp and 1.5pp of additional GDP growth in 2023-2024 for the level of insolvencies to stabilize. Additionally, companies will have to watch out for domino effects: the number of insolvencies for companies with more than EUR50mn in revenue is now slightly above pre-pandemic levels. Construction, retail and services are the most affected sectors”, adds Maxime Lemerle.

This report underscores the importance of companies taking proactive measures to manage their risks, such as monitoring their cash flow, developing contingency plans, and working with credit insurers to help mitigate potential losses.

The recent disruptions experienced by the banking sector in Europe and in the U.S. are raising a legitimate question: what would be the impact of a credit crunch on business insolvencies?

“According to our estimates, a financial crisis as that seen during the 2008 financial crisis would mean 21,600 additional insolvencies in the US over 2023 and 2024, and 99,900 in Western Europe. Even without a major financial crisis, a credit crunch of the magnitude seen in the early 2000s during the tech bubble burst would lead to 12,900 and 95,300 additional insolvencies over 2023 and 2024, respectively. And in case of a credit freeze that would stop new loans, insolvencies would increase by an additional 10,700 cases in the US and 46,300 cases in Europe”, answers Maxime Lemerle.

If you want to know more about our forecasts and get more data and details for a specific country, region or sector, take a look at our Global Insolvency Report below.

Download the full report

Allianz Trade Insolvency Report – full report 1 MB

Press contact

Maxime Demory
+33 1 84 11 35 43
maxime.demory@allianz-trade.com

SOURCE: ALLIANZ