Senior Insurance Executive | Underwriting Leader | Portfolio Performance & Governance | Public Speaker & Storyteller | Driving Growth, Capital Alignment & Innovation
The Market Never Listens When Insurers Whisper Last week's post on First Brands reached 170,000+. Sparked hundreds of emails and debates. However, there is more: Trade Credit Insurance. A safety net which became the trigger. I’ve Written This Business A former boss hated TCI. We had a large book. Strong margins. Loyal clients across 40 countries. He’d always ask: “Isn’t this just cheap financing dressed as insurance?” I’d push back. I believed in the product. I still do. But not how it's being used now. What Happened First Brands filed for bankruptcy in September. $1.3 billion in debt. What many may not know: Their lenders relied on TCI as collateral. Months before collapse: ▪️ Allianz tightened terms ▪️ AIG reduced exposure ▪️ Coface scaled back coverage Quietly. Deliberately. Consistently. When policies disappeared, so did trust. The collapse accelerated. How It Evolved TCI used to protect sellers against buyer defaults. Simple. Defensive. Sensible. But it evolved: Stage 1: Funds financed invoices at scale Stage 2: They hedged using insurance Stage 3: Insurance became bank collateral The chain: → Fund buys invoice → Fund insures invoice → Bank lends against insured invoice → Policy becomes tradeable security Insurance stopped protecting trade, and started underwriting leverage. Why Insurers Always See It First Underwriters have real-time payment and exposure data. They’re the early warning system. When Allianz reduces limits early, they’re seeing: ▪️ Payment patterns shifting ▪️ Credit quality declining ▪️ Concentration risk building The problem? They reduce exposure quietly. No public signal. By the time bankruptcy hits, insurers have hopefully de-risked. Everyone else? The Systemic Issue TCI is now systemically important; without transparency or oversight. Consider: ▪️ $3+ trillion in global exposure ▪️ Used as collateral ▪️ Concentrated among few carriers ▪️ No central reporting or stress testing When Greensill collapsed in 2021, TCI was central to the contagion. We said we’d learned. Here we are. What Needs To Change Stop treating this as niche. It’s not. That means: ▪️ Disclosure when carriers reduce major exposures ▪️ Stress testing that includes insurers ▪️ Legal clarity on collateralized policies The alternative? More First Brands. More Greensills. The Bottom Line My old boss was right to be skeptical. We’ve deployed TCI in ways that look safe, while concentrating risk we can’t see. Insurance became collateral. Collateral became liquidity. When insurers walked away, liquidity disappeared. Not just for First Brands. For everyone connected to them. That’s not a safety net. That’s a single point of failure. The Question Should TCI have disclosure requirements? Both see it first. Only one must publish their views. What’s your take? #TradeCredit #CreditRisk #SupplyChainFinance #Greensill #SystemicRisk
Super insightful, Doug — saved the post for future reference!
Thank you, great post!
Global Markets, Trading, Tech
1wGiven my credit derivative background, I briefly looked at TCI a long time ago and never really understood the logic behind its pricing. Given that most of the entities were not rated, I concluded that the prices were based on the Law of Large Portfolios and just hope the insurer have a sufficently diversified portfolio!