Credit and surety insurance sees strong growth: AXA XL Reinsurance report

The credit, political risk and contract frustration market saw substantial overall premium volume growth from 2022 to 2024. Key drivers included inflationary pressures from the pandemic and war in Ukraine, post-pandemic economic recovery and increased bank demand. Despite economic turmoil, loss ratios remained benign, although political risk and contract frustration loss activity increased with a corresponding tightening of terms and conditions. 

Surety market growth was similarly impressive, driven, for example, by inflation, infrastructure investments and an enhanced ability to capture bank business. Although half the survey’s respondents reported rising surety loss ratios, these generally remained low. 

Geopolitical tensions and tariffs

The market has coped well with geopolitical tensions and elevated uncertainty since the end of the pandemic. Supply chain disruption is taken into account in risk assessment and management. Market impacts include a general increase in selectivity, the continued pull-out from Russia after its invasion of Ukraine and business shifting to other regions (supported by low penetration).  

Experts in AXA XL Reinsurance’s mid-year survey webinar reported no immediate signs of distress specifically related to the 2025 tariff crisis. Chinese credit insurers are adapting to a broader and more volatile buyer base as China’s export mix shifts away from US dependency. Latin America’s surety market remains upbeat, given its agriculture-based exports, underdeveloped infrastructure and significant investment potential. 

In the US, however, uncertainty and government spending cuts could slow surety growth despite strong construction demand. Overall, credit and surety insurers have remained calm – continuing to apply robust risk management practices and monitor the impacts of the crisis. Looking ahead, selectivity could increase, but optimism prevails as insurers explore new customer segments and expect demand to benefit in the higher risk environment.  

Increased importance of banks

Banks have higher awareness of insurance, value the economic benefit of insurance and prefer to share exposures with insurers rather than competitors. For surety, the high cost of equity for bank guarantees has supported the market’s enhanced ability to capture bank business. Bank-fronted surety in the US and syndicated facilities in Europe are also seen as sources of growth. 

Furthermore, Basel IV is not considered to be a major threat to bank business. Insurance is not just used by banks for capital relief, which is expected to reduce under Basel IV, but also to mitigate risk, increase lending capacity, help manage internal limits/ sector concentrations and diversify portfolios. 

Basel IV impacts will ultimately depend on market relevancy (in the US, for example, banks are prohibited from the surety space), on how the accord is ultimately implemented by jurisdiction and on how banks adapt their strategies. The market expectation is that credit and surety products that benefit banks, such as credit insurance required by banks for loans, will continue to experience growth.

AI in widespread use

AI usage examples in credit and surety include fully automated risk assessment for smaller risks/small bonds, data transfer from submissions, identifying patterns in credit ratings to enhance portfolio modelling and fraud detection, e.g., by spotting unusual movements in financial statements. A secure, controlled data environment and deep understanding of tools is considered vital.  

2026 outlook

Looking ahead, the survey found that  in the credit and surety sector we will see slowing but continued growth as portfolios adjust and loss ratios continue to creep upward in the higher risk environment. At AXA XL Reinsurance, we are committed to supporting the credit and surety market as a trusted global reinsurance partner. Combining financial strength and industry expertise with leading technology and agility, we look forward to the upcoming renewals and empowering our clients to achieve their growth objectives.

View the market survey report and webinar: axaxl.com/reinsurance insights

Felix Winzap is head of credit and surety, AXA XL Reinsurance; Alexander Steiner is senior underwriter, credit and surety, AXA XL Reinsurance. They can be contacted at felix.winzap@axaxl.com and alexander.steiner@axaxl.com  respectively.

For more news from Monte Carlo Today, click here.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.