Greasing the wheels of the economy

Credit insurance is one of the most vital yet underrepresented areas of the insurance industry. Often operating behind the scenes, it plays a pivotal role in enabling business-to-business trade and stabilising cash flows, especially in today’s volatile economic environment.  

At Credit Guarantee Insurance Corporation (CGIC), our mandate is simple: to protect our clients from the risk of non-payment by their customers due to insolvency, business rescue, or protracted default. But behind that simplicity lies a sophisticated mechanism that supports liquidity, drives economic growth, and enhances business confidence. 

Understanding credit insurance

At its core, credit insurance, or trade credit insurance, covers a company’s receivables. In practical terms, we insure the money owed to our clients by their customers for delivered goods or services. If a buyer fails to pay due to insolvency, business rescue, or prolonged default (typically beyond 6 months), CGIC steps in to absorb that loss. This support ensures that our clients’ operations aren’t crippled by unpaid debts and that their working capital remains intact. 

CGIC is 75% owned by Old Mutual Insure and 25% by Atradius, the second-largest credit insurer in the world, based in Spain. This partnership positions us not only with solid local roots but also with access to global insights, data networks, and credit risk expertise. 

Trading in uncertain times 

The current global and local economic environment is riddled with uncertainty. Recent geopolitical developments, such as trade tariff tensions and broader market volatility, continue to impact the predictability of trade. Locally, South Africa is grappling with stagnating growth, with last year’s GDP at approximately 0.8% and this year’s forecast barely surpassing 1.3%, numbers that are increasingly under pressure due to global headwinds. 

For businesses, this means heightened risk in trading environments, uncertainty in forecasting, and reduced confidence. That’s where credit insurance becomes indispensable. Our product acts as a safety net, ensuring that in times of customer default, our clients’ cash flows are protected. It enables them to trade with confidence, knowing that CGIC is there to cushion the blow of unexpected losses.

Risk management through data and dialogue

Managing risk in such a turbulent environment is no small task. While we cannot predict the future, we rely on vast global data networks and partnerships to track economic trends, industry-specific movements, and emerging risks. We then analyse this data through a combination of scenario modelling and ongoing engagement with our clients and their customers. 

These conversations on the ground, paired with robust data analytics, allow us to generate actionable insights and adjust our risk appetite accordingly. While events like trade wars or political surprises (often referred to as “black swan” events) cannot be forecasted, most risk can be assessed and mitigated through our disciplined underwriting process. 

A specialist approach to distribution

Our primary route to market is through a select network of brokers. These are not just any brokers, but ones who possess, or are willing to develop, a deep understanding of the credit insurance landscape. This is a highly specialised product, and as such, we invest heavily in training our partners. 

We work with major local and international brokerages, who house dedicated credit insurance divisions within their global structures. Our relationships with these partners are collaborative and built on shared expertise. Additionally, CGIC has a direct sales force that actively engages with clients, offering bespoke solutions to address the risks they face in their trading cycles. 

If a broker is looking to enter the credit insurance space, they need more than a basic understanding of insurance. They need to grasp the intricacies of business-to-business trading, understand economic indicators, and most importantly, be willing to immerse themselves in the mechanics of credit risk. 

At CGIC, we offer comprehensive training to equip brokers with the knowledge required to succeed in this niche. Once they demonstrate this capability, we recognise them as specialist brokers, key partners in delivering our value proposition to the market. 

A catalyst for growth

Credit insurance is far more than just a claims-paying product. It’s a financial tool that underpins working capital and facilitates growth. Our policyholders often use our insurance certificates as collateral with banks, enabling them to access additional funding. In this way, credit insurance becomes an enabler of greater trade volumes, improved liquidity, and ultimately, economic expansion. 

We often describe our product as “greasing the wheels of the economy”, and for good reason. By protecting receivables, we create the confidence for businesses to sell more, grow faster, and trade further. In a country like South Africa, where growth is sluggish and business confidence is fragile, the role of credit insurance is more critical than ever. 

To explore more

Established in 1956, Credit Guarantee Insurance Corporation (CGIC) is South Africa's leading trade credit insurer, providing both domestic and international trade credit insurance across the African continent. Given the pivotal role of the Global South in the expansion of credit insurance, Atradius N.V. holds a 25% share in CGIC, underscoring the significance of this strategic alliance.

To explore more on how you can strengthen your own credit risk strategy, speak with us at Atradius to see how we can help you stay ahead.

This article was originally published in Cover Web Magazine as “Greasing the wheels of the economy.”