# Trade Credit Insurance & Risk

## Executive Summary

The UK trade credit insurance market writes approximately **£0.8 billion** in gross written premium annually. Insurers are pulling back from higher-risk SME segments, leaving a data and pricing gap that technology-driven risk models can address. This research maps the market structure, risk signals, and the opportunity for SoVael's automated underwriting approach.

---

## Market Structure

The UK trade credit insurance market is concentrated and conservative:

| Metric | Value |
|--------|-------|
| Gross written premium | £800 million (approx.) |
| Top 3 insurers' market share | >70% |
| Average premium rate | 0.2% – 1.0% of insured turnover |
| SME penetration | <15% of eligible SMEs |
| Claims ratio | 45-55% (profitable but tightening) |

### Key Players
1. **Euler Hermes (Allianz Trade)** — Market leader, global reach
2. **Coface UK** — Strong in mid-market
3. **Atradius** — European focus, growing UK presence
4. **QBE** — Lloyd's syndicate, selective risk appetite
5. **Tokio Marine HCC** — Specialist, niche covers

Insurers predominantly serve large corporates and established mid-market firms. SME coverage is limited, expensive, or bundled into broader business insurance packages with low limits.

---

## Risk Signals

Useful data for assessing trade credit risk:

| Signal | Source | Availability | Predictive Power |
|--------|--------|-------------|-----------------|
| Companies House filings | Public | Free, API-accessible | Medium |
| Credit-bureau ratings | Experian, Equifax, Creditsafe | Paid, API-accessible | High |
| Payment history | Accounting data, Open Banking | Consented, API | Very High |
| Buyer financials | Companies House, private | Varied | High |
| Sector concentration | SIC codes, trade data | Public | Medium |
| County Court Judgments (CCJs) | Registry Trust | Public | High |
| Director history | Companies House | Public | Medium |

Machine-learning models combining these signals can predict late payment and default probability more dynamically than periodic bureau scores.

---

## Data Gaps

SMEs present specific challenges for traditional credit assessment:

1. **Thin credit files** — many SMEs have limited credit history. Traditional bureau scores default to conservative ratings, inflating insurance premiums or excluding them entirely.

2. **No audited accounts** — most SMEs file abbreviated accounts at Companies House, providing limited financial detail.

3. **Rapid change** — an SME's financial position can change significantly within one accounting period. Annual bureau scores lag reality.

### Bridging the Gaps
- **Open Banking** — transaction data provides real-time cash-flow visibility
- **Accounting integrations** — Xero, QuickBooks, FreeAgent feeds deliver live P&L and balance sheet
- **Payment behaviour** — actual payment timing data is more predictive than stated terms
- **Director personal credit** — for very small SMEs, director credit history adds signal

---

## Insurance Gap — Where SoVael Fits

Traditional insurers' risk appetite leaves a gap:

| Segment | Insurer Appetite | Gap |
|---------|-----------------|-----|
| Large corporate (>£50M turnover) | High | None |
| Mid-market (£5M-£50M) | Moderate | Thin — competitive |
| Small business (£500K-£5M) | Low | Significant — underserved |
| Micro/Sole trader (<£500K) | Very low | Large — almost unserved |

SoVael targets the **small business segment (£500K-£5M turnover)** where:
- Demand for trade credit protection is real
- Traditional insurers are pulling back
- Automated risk models can assess risk more accurately
- Technology reduces the cost of underwriting and claims

---

## SoVael Approach

1. **Build an SME receivables risk score** using public and consented private data
2. **Pre-qualify advances** — suggest credit limits based on risk score and buyer portfolio
3. **Price risk granularly** — dynamic pricing based on real-time risk signals, not annual reviews
4. **Automate claims** — when a buyer defaults, trigger advances and recovery automatically

---

## Regulatory Note

Trade credit insurance is regulated by the FCA and Prudential Regulation Authority (PRA). SoVael's risk-scoring model is a **data product**, not an insurance product. The insurance is provided by regulated partners. SoVael earns fees for risk assessment, platform access, and programme management — not for carrying insurance risk.

---

## Sources

- Association of British Insurers (ABI) — Trade Credit Insurance Statistics 2025
- Coface / Euler Hermes — SME Risk Research Reports
- Creditsafe / Experian — Credit Bureau Methodology Guides
- UK Government — Companies House Data Products
- Bank of England — Financial Stability Report (trade credit section)

---

*SoVael Finance Research Centre — Q2 2026*