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The credit-bond insurance market on the brink of collapse
Credit-bond insurance stands out in the global financial panorama. A discreet but indispensable mechanism for economic stability, it plays out as an essential tool for securing commercial transactions.
Its operation is based on a subtle balance between supporting businesses and exercising caution imposed by solvency and profitability requirements.
Far from being a simple financial product, credit-bond insurance becomes a vital instrument in times of crisis, a testament to both its usefulness and its limitations.
Undermined by the 2008 financial crisis and Covid-19 a few years later, credit-bond insurance would not have overcome these shocks without substantial support from the government.
The current environment, unusually marked by a combination of major risks, reveals the fragility of the insurance model.
Geopolitical tensions, unilateral sanctions, wars, trade wars, Sino-American trade rivalry, government debt, inflation, natural disasters… All these risks tend to increase companies' need for coverage.
To maintain their financial stability once again, and avoid being overwhelmed by claims, insurers have no choice but to restrict their capacity while applying a highly selective underwriting policy.
Still walking on thin ice, with no real room for maneuvering, private insurers need, as in the past, the public sector to save the system and continue to exist. However, this second bailout has proved to be more complicated than in the past, given that the 2025 loss ratio reached record highs and the risks of corporate bankruptcy and sovereign insolvency are at their peak.
