In today's connected world, global events cause shockwaves that strain supply chains through geopolitical conflicts and extreme weather events resulting in high costs, disruptions and delays.
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Author: Martin Delaney

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The rapid exposure to new volatile conditions brings constant challenges to businesses in Canada and overseas. Data from the Canadian Association of Insolvency and Restructuring Professionals shows 1,312 companies filed for bankruptcy in the third quarter of 2024, the highest since the 2009 financial crisis. In Ontario, bankruptcy filings rose 67% year-over-year in Q3, while Quebec saw a 40% increase.1 High-risk sectors include construction, retail, and hospitality and leisure.

Canadian insolvency statistics

Organizations aiming to balance future growth plans with current balance sheet protection can benefit from trade credit insurance as a credit risk mitigation tool that supports their business decisions. Many companies incorporate trade credit insurance into their overall risk management strategy to safeguard against bad debt losses in their accounts receivable portfolios. For multinational companies, trade credit insurance is commonly used to manage B2B-receivables risk-concentration concerns and to facilitate the extension of open credit necessary for cross-border transactions.

What is trade credit insurance?

Trade credit insurance provides a layer of protection for businesses against the risk of nonpayment for goods or services sold on credit, whether in domestic or international markets. This coverage is especially valuable given the complex cash-flow cycles and extended payment terms that many companies face. If a customer or subcontractor fails to pay — often due to insolvency or prolonged default beyond an agreed-upon period — trade credit insurance can provide crucial financial protection, helping businesses maintain stability and continue operations with confidence.

Trade credit insurance provides many benefits, including providing insights into the financial health of new and existing customers by using the insurer's real-time credit intelligence and risk scoring/rating systems and providing an early indication of potential problems.

A number of risks can be insured under trade credit insurance products, including:

  • Nonpayment or late payment
  • Customer bankruptcy, insolvency or similar legal status
  • Nonpayment following an event outside the control of the buyer or seller
  • Negative impact on businesses due to political instability or changes, such as conflicts, regime changes or international policy shifts
  • Cancellation of fixed contracts due to pre- and post-delivery risks
    • Pre-delivery risks include political violence, war, embargoes and license cancellations.
    • Post-delivery coverage includes the fair or unfair call of performance bonds, typically backed by a letter of credit from a financial institution.

Note that insured risks must have a direct link with the delivery of goods or services, otherwise they aren't insurable.

Claims scenario: Closing deals overseas

The company: A growing auto manufacturer focusing on fleet sales
The challenge: An automotive manufacturer was looking to expand their operations overseas. However, it was difficult to take any major risks, which hurt the organization when an international buyer wanted to place a large order.
While the purchase would have been the biggest in the manufacturer's history, the deal fell through because the buyer didn't have enough working capital to complete the deal, and it was too risky for the auto manufacturer to take the buyer on credit.
Trade credit insurance in action: Trade credit insurance would have allowed the organization to close the deal without taking on significant risk to the company.

Claims scenario: The missing company

The company: A midsized retail company specializing in office supply sales
The challenge: The company recently completed a large transaction with a loyal customer that was opening a new location and needed a large quantity of office supplies. When negotiating the terms of the sale, the customer asked for a payment extension. This request isn't unusual, and the office retailer was happy to provide an extension on credit to a long-time client.
However, on the new payment due date, no money arrived. After sending several past-due notices, the retailer contacted their lawyers and learned that the customer's company was under financial stress. The customer made no payment, and the retailer was out thousands of dollars.
Trade credit insurance in action: The lost revenue not only impacted their balance sheet, but their entire client base. When one customer abuses credit, it affects an organization's ability to extend credit to other customers. In instances like this, trade credit insurance could have provided cash flow relief in the event of nonpayment.

Did you know?

Bad debts can have a devastating impact on businesses. Replacing lost revenue on the balance sheet requires a significant increase in extra sales. A business with $50K in bad debt and a net profit margin of 4% would need $1.25 million in extra sales to recover the loss, and this number is before taking interest charges into account.

$50K in bad debt requires $1.25 million in extra sales to recover the loss

The current climate

Canadian businesses continue to operate in a difficult trading environment against a backdrop of ongoing global economic and political uncertainty. Conflicts and global tensions have led to spikes in global energy prices and transportation routes have been heavily impacted by the attacks in the Red Sea, resulting in extensive diversions.3 Additionally, geopolitical pressures can result in new tariffs, trade barriers and regulatory changes that complicate international trade. These disruptions can also result in longer lead times, increased costs and decreased efficiency, making it challenging for businesses to maintain smooth operations.

We've yet to see the true impact of how recent large business insolvencies have affected suppliers, debtors and customers due to unpaid debts. This effect will be felt throughout the supply chain and take place over many years.

With a new Canadian government and nearly 80 elections held worldwide in 2024, it's difficult to predict the future direction of many countries and the businesses that operate within them. By understanding your business risk profile and investing in solutions such as trade credit insurance, you can help mitigate these exposures and safeguard yourselves against any potential challenges in the future.

Benefits of a confidential review

Gallagher can conduct a strategic audit of your risks, identify potential gaps in your existing insurance cover and benchmark the cost of your current program. It's 100% confidential; your existing broker won't know that the review is taking place, so no current relationships are affected. The review can take place at any time within the term of your current insurance arrangements, irrespective of whether you have a long-term agreement or renew annually.
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Author Information

Sources

1"CAIRP: Q3 2024 Canadian Insolvency Statistics", Canadian Association of Insolvency and Restructuring Professionals, 12 Nov 2024.

2"Insolvency and CCAA Statistics in Canada", Government of Canada, updated 3 Jun 2025.

3Sainz, Victoria. "The Red Sea Shipping Crisis (2024-2025): Houthi Attacks and Global Trade Disruption", Atlas Institute for International Affairs, 27 Mar 2025.