PODCAST | Trade credit insurance in Latin America: unlocking finance, managing risk, and scaling access - Trade Treasury Payments

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At the Grand Hyatt in Rio de Janeiro, Trade Treasury Payments (TTP) Editor-in-Chief Deepesh Patel sat down with Franklin Nogueira, SVP, Regional Leader, Trade Credit, Global Clients Group, Latin America & Caribbean (LAC) at Marsh. 

Their conversation explored the role of trade credit insurance in the region, its links with factoring and supply chain finance, and the barriers and opportunities shaping the market for mid-sized corporates and SMEs.

Aligning insurance and receivables finance

Deepesh Patel (DP): Franklin, how do trade credit insurance (TCI) and receivables finance – like factoring or supply chain finance – work together? What should treasurers know about using these tools in tandem?

Franklin Nogueira (FN): Trade credit insurance complements factoring – it’s not a competing product. TCI covers the risk of buyer non-payment, which protects the factor or lender, making receivables-based financing more secure. In fact, nearly half of factoring firms globally use credit insurance, covering around 42% of their buyer portfolios. This speaks to the synergy between the two.

Many companies now leverage TCI specifically to unlock financing. Insurers can act as a “second pair of eyes” on buyer risk and guarantee payment, which gives banks and factors greater confidence to extend more credit. Over half of recent inquiries for TCI have come from firms looking for better funding terms. In effect, they’re using insurance as a pathway to cheaper or higher credit lines. This dual strategy helps strengthen cash flow while protecting against defaults.

TCI usage among Latin America’s mid-market firms

DP: What is the current landscape of trade credit insurance in Latin America, especially for mid-market and SME corporates? Is coverage becoming more accessible to smaller businesses?

FN: The market in Latin America is still quite nascent. Across the entire region, there are only about 4,000 TCI policies in place and around 1,500 in Brazil. That’s a small number compared to Europe. Historically, many mid-sized firms and SMEs have gone uninsured, even though in Brazil, for instance, roughly 40% of company assets are receivables. Before the COVID-19 pandemic, most of those receivables were completely uninsured.

That’s now starting to change. The pandemic created a wave of insolvencies, and businesses saw first-hand the value of protection. We’re seeing a clear rise in demand, especially as more firms look to avoid being caught off guard by a large customer default.

That said, accessibility remains a challenge. Many SMEs are unaware of TCI or assume it’s too expensive or complex. And in some markets like Mexico or Colombia, there are a comparatively smaller number of active insurers. 

Still, there’s progress. Insurers and brokers are introducing simplified, SME-focused policies, as well as digital platforms that make it easier to quote and bind coverage. There’s a real push to educate SMEs that TCI is not a luxury, but an investment in securing cash flow. As awareness grows and more insurers enter the market, we expect access for mid-sized companies to improve significantly.

Geopolitical pressures and regional stress events

DP: How have recent geopolitical and economic shifts – such as high inflation, rising interest rates, and geopolitical tensions – affected credit insurers’ risk appetites and claims trends, particularly in Latin America?

FN: We’re seeing global insolvencies on the rise, and also insurers becoming more cautious. Since 2022, Marsh has observed a steady increase in the frequency of claims, and by 2024, we were getting back to pre-pandemic levels, or even higher.

Underwriters are reacting by tightening their risk assessments and monitoring exposures more closely. They’re still underwriting new business, but are more selective, especially in higher-risk sectors or regions. Among their concerns is that prolonged inflation and slower growth will strain buyers’ solvency.

One major wake-up call in the region was the collapse of Lojas Americanas in Brazil. That happened in early 2023 and left around $8 billion in unpaid invoices. It resulted in an estimated $600 million in insured losses. After that, many insurers scaled back their exposure to large retail buyers in Brazil to manage risk.

But this event also demonstrated the product’s value, as claims were paid, protecting suppliers. And interestingly, despite the pressures, ICISA data shows that global claims actually decreased by about 0.8% in 2024, suggesting that insurers absorbed the shocks.

Regulatory progress and what’s still missing

DP: Does the regulatory and legal environment in Latin America support the growth of credit insurance and factoring? Are there areas where regulations need to catch up?

FN: It varies significantly across the region. In some countries, the legal frameworks for factoring are viewed as still outdated. The concept of selling or pledging receivables isn’t always clearly defined, which creates uncertainty for financiers. Where you have modern laws or electronic invoice registries in place, it’s much easier to enforce contracts and support factoring.

There are efforts underway to improve this. International model laws from organizations like UNCITRAL or UNIDROIT are being used to help modernise legislation around receivables finance. When policymakers clarify how receivables can be assigned and when they strengthen protections for factors, it can unlock significant growth in the market.

For trade credit insurance, one issue is regulatory recognition as a risk mitigant. In many jurisdictions, including the US, private TCI is generally not considered eligible collateral under Basel rules. That limits the extent to which insurance can help drive financing. Even when a receivable is insured, a bank might not lend more against it or offer better terms due to regulatory constraints.

Changing this would be a game-changer. If banks could lower their capital requirements when loans are backed by rated credit insurers, we’d see far greater use of TCI in trade finance. There’s also a case for encouraging greater competition, perhaps by adjusting the rules for foreign insurers or encouraging joint ventures with local insurers. While some countries are making progress, like Brazil, have updated their solvency rules, greater alignment is needed to unlock full market potential.

Digital underwriting and embedded protection

DP: What innovations are you seeing in how trade credit insurance is underwritten and distributed? Is technology making it easier for companies to get covered or for insurers to assess risk?

FN: Absolutely. Advanced analytics and AI are transforming how underwriting is done. Insurers today are using big data and machine learning to assess buyer creditworthiness in real time. Rather than relying only on financial statements, which for SME buyers might be limited, insurers can pull in alternative data sources and flag potential risks earlier.

This means quicker decisions and more tailored coverage. For example, a buyer’s credit limit might now be dynamically adjusted based on new information, like payment behaviours or market signals. It not only speeds up the process but also makes it possible to insure a broader range of buyers, including those in emerging markets with more limited credit data.

On the distribution side, technology is lowering barriers to entry for insurers. We’re seeing online portals and fintech partnerships that let companies quote, bind, and manage coverage in just a few clicks. Some insurers now offer APIs that integrate directly into factoring or supply chain finance platforms. That allows insurance to be embedded directly into the financing process. For a treasurer, it could mean that when you go to finance an invoice, the system automatically generates a credit insurance quote for that specific receivable.

These innovations are simplifying the experience, cutting down paperwork, and reducing lead times. For mid-market firms, it can mean coverage in days instead of weeks. Overall, digital innovation is making TCI more accessible and scalable.

Public-private solutions to fill the gaps

DP: How can governments or multilateral institutions help expand access to trade credit insurance? Do you see a role for public-sector support, especially for SMEs or in higher-risk markets?

FN: There’s a very clear role for public-private partnerships, especially in times of crisis. During the COVID-19 pandemic, several European governments stepped in with guarantees or reinsurance schemes to keep trade credit insurance flowing despite the spike in defaults. This gave insurers the confidence to keep writing business and helped businesses maintain trade.

Latin America could consider similar models, maybe via export credit agencies or development banks partnering with private insurers to co-insure SME risks or provide second-loss guarantees. That could drive greater insurer confidence to extend coverage to smaller or riskier firms, especially during uncertain periods. It also can align with public goals like preserving jobs and sustaining trade.

We’re also seeing multilaterals like the Inter-American Development Bank (IDB) use TCI creatively. The IDB recently secured $300 million of private credit insurance to protect part of its loan portfolio. That freed up capital to lend an additional $1.2 billion into Latin America. They effectively used TCI as a tool to stretch their balance sheet. Institutions like the IFC or regional development banks can play a similar role, either by reinsuring private insurers or by supporting blended finance structures that make premiums more affordable for SME exporters.

These partnerships help to fill gaps, especially in emerging or high-risk sectors.

Outlook: strong global momentum, local opportunity

DP: ICISA’s latest data shows €3.5 trillion in trade covered globally in 2024, a 7.5% year-on-year increase. Marsh’s own data shows insurers expanding capacity and lowering premiums. What do these global trends mean for Latin America?

FN: The global picture is one of growth and resilience. Trade credit insurers are covering more trade than ever. But with only 15% of global trade protected, that leaves 85% uninsured, so the room for expansion is massive.

For Latin America, which represents a very small portion of insured trade, this is a major opportunity. International insurers are likely to increase their presence, and local players, such as banks offering surety or guarantees, are stepping up too, especially as trade volumes recover.

Marsh’s latest numbers show that insurers raised their credit limit approval rates from 73% to 78% in the first half of 2024. At the same time, premiums have decreased overall to multi-year lows. That’s a favourable environment for buyers. Latin American corporates with good risk profiles should take note. They could potentially access more credit, at better rates, than just a few years ago.

The key is awareness. If mid-sized firms begin to see peers using TCI to enter new markets or secure financing against insured receivables, usage could take off. The global momentum is real, and Latin America has an opportunity to be part of the next wave of growth.

DP: Franklin, thank you for the conversation.

FN: Thank you, Deepesh.