Growth in the global credit insurance market has stalled for the first time since the Covid-19 pandemic, raising questions about the impact of new banking capital regulations on lenders’ appetite for risk mitigation tools. Industry experts say the slowdown may mark the beginning of a structural shift in how banks, particularly large European institutions, deploy credit insurance to manage capital and lending exposure.
According to a survey conducted by the International Association of Credit Portfolio Managers (IACPM) in collaboration with the International Trade and Forfaiting Association (ITFA), total exposure covered by credit insurance reached $191.5 billion in June 2025, up from $191 billion at the end of 2024. The result ended a three-year period of steady growth following the post-pandemic trough of $126 billion in 2021.
The survey also indicated a decline in the total transaction amount facilitated by credit insurance, which fell from $455 billion in 2024 to $440 billion in June last year. The contraction comes amid the introduction of new capital requirement regulations in the European Union, whose lenders represent the largest single cohort of credit insurance users globally. The reforms, part of the Basel 3.1 framework (often referred to as Basel 4), reduce the capital relief that banks can obtain by insuring loans, altering the economics of credit insurance as a risk management tool.
“The banks that have been using credit risk mitigation are still using it, but for different purposes and to a lesser extent, and that is purely the result of the European legislation,” said Richard Wulff, executive director of the International Credit Insurance & Surety Association.
Jean-Maurice Elkouby, a member of ITFA’s insurance committee, described the trend as an early indicator of the regulatory impact. “It’s a bit early days to conclude, really, but it was on such a strong growth path, it seems that it’s linked to Basel. And we know anecdotally that large banks have changed their buying behaviour,” he said.
The Basel reforms primarily affect banks that use the internal ratings-based (IRB) approach to calculating credit risk, typically the largest institutions. Smaller banks that follow the standardised approach (SA) have largely been insulated from the immediate effects. Charlie Radcliffe, chief commercial officer at specialised broker BPL, said the new capital rules have made credit insurance less attractive for certain large banks having used credit insurance for management of risk-weighted assets, even where the underlying risk transfer has not changed.
Yet he cautioned that the survey may understate market activity. “The results do not fully reflect activity among newer users, mostly following the standardised approach, or the growth we continue to see in more complex, higher-priced transactions,” Radcliffe said.
Chris Hall, head of financial institution sales at broker WTW, noted that smaller banks remain active users of credit insurance. “They are much, much more alert for using credit risk insurance as a form of syndication to help them achieve bigger ticket sizes, be more relevant in the lenders’ waterfall, and ultimately get more from their clients,” Hall said.
He added that pricing pressure on corporate lending may have dampened appetite for credit insurance during the survey period. “I think pricing has come in, and I think that it’s not stopping business, but it’s meaning that people are having to be more thoughtful,” Hall explained.
Credit insurance continues to play a central role in banks’ risk management strategies despite the regulatory headwinds. Alongside trade finance exposures, the main assets covered include project finance debt, revolving credit facilities, and term loans extended to large corporates. Banks also cite regulatory capital relief and freed-up lending capacity as key motivations for purchasing cover. Just under a quarter of surveyed institutions reported that regulatory capital relief was their primary goal, a slight increase compared with the previous year, while the most common objective remained the ability to expand lending capacity.
Regional patterns remain pronounced. In Asia-Pacific, credit insurance is the dominant tool for risk mitigation, while in Europe and the Middle East it ranks second after loan sales and syndications, alongside synthetic risk transfer instruments.
The IACPM survey quantified banks’ perception of regulatory capital relief as an obstacle to using credit insurance, which rose from 0.85 in the 2023 survey to 1.51 out of 3 in 2025. This reflects the diminished capital incentive under Basel 3.1 and points to an emerging structural constraint for large European banks.
Despite the slowdown, market participants remain cautiously optimistic about future growth. There is evidence that credit insurance continues to support complex, higher-margin deals and that smaller banks are increasingly leveraging insurance as a tool to expand their client offerings and manage capital efficiency.
Analysts note that credit insurance is likely to remain a core element of capital and risk management strategies, particularly for banks operating in international markets or in sectors where project finance, trade credit, and structured lending dominate. Regulatory shifts may simply reorient the market rather than suppress it.
The IACPM survey of 46 banks showcases a transitional moment for the industry, as decades of uninterrupted growth in credit insurance exposure have paused, reflecting a confluence of regulatory reform, pricing pressure, and shifting market dynamics. While large banks scale the impact of Basel 3.1, smaller institutions and emerging markets continue to use credit insurance to expand lending, mitigate risk, and enhance competitiveness.
