In the wake of U.S. President Donald Trump's trade tariffs, Canadian exporters are increasingly turning to a little-known insurance product—trade credit insurance—to protect themselves against potential losses and bankruptcies among their suppliers and customers. This form of insurance, which covers 90% of all lost payments due to foreign customer insolvencies, is gaining traction in a market where Canadian exporters currently insure less than 1% of their overseas payments, despite these transactions accounting for a significant 40% of their revenue.
According to the Receivables Insurance Association of Canada, trade credit insurance has never been popular for business between the U.S. and Canada, largely because risks have been minimal under free trade agreements that have been in place for three decades. However, the landscape has shifted dramatically with the introduction of tariffs, leading to a surge in inquiries about coverage.
Agatha Alstrom, vice president of Insurance and Working Capital Solutions at Export Development Canada (EDC), noted the increasing demand for trade credit insurance amid the uncertainty surrounding Trump’s tariffs. “Tariffs are changing significantly from day to day,” she explained. The unpredictability of these tariffs makes it challenging for exporters to determine their impact on businesses.
EDC, which is Canada’s largest trade credit insurance provider, is currently overseeing the disbursement of C$5 billion allocated by the government to assist businesses affected by U.S. tariffs. Despite this support, only about 5%, or between 7,000 and 10,000, of export businesses currently carry credit insurance. However, since January 2025, inquiries about coverage have increased by 10%, signaling a growing awareness of the risks involved.
David Dienesch, CEO of Allianz Trade in Canada, a subsidiary of Germany’s Allianz, highlighted the potential for rising bankruptcies in both Canada and the United States. “If I buy credit insurance, those bankruptcies are not going to impact me as much,” he stated, emphasizing the protective nature of the insurance.
The impact of Trump’s tariffs has already begun to affect Canadian businesses, squeezing their profit margins and prompting discussions on how to cope with rising costs. Tariffs on Canadian steel, aluminum, and automotive imports have led to significant strain, with many companies facing dried-up order books. Michelle Davy, chairwoman of the board of the Receivables Insurance Association of Canada, expressed concern about the current climate, stating, “We are fielding calls on a daily basis. … People are afraid.”
Davy, who also serves as president of CreditAssur Inc., a credit insurance broker, has observed troubling signs, including payment delays and an uptick in insolvencies. In one notable instance, she reported that a client had three of its suppliers declare insolvency in a single week, illustrating the growing financial instability in the sector.
The COVID-19 pandemic has also played a role in increasing interest in credit insurance, as many companies realized they lacked coverage for business interruptions. Danish Yusuf, founder of business insurance provider Zensurance, noted that while his company does not provide credit insurance, he often directs inquiries to providers that can offer products designed to shield businesses from the risks associated with U.S. partners in distress.
As the government rolls out various programs to educate businesses about trade credit insurance, Alstrom believes that inquiries will eventually convert into actual coverage. She pointed out that as stockpiles companies are building to mitigate the impact of tariffs dwindle, the need for insurance will become even more pressing. “Import duties are starting to hit supply chains,” she warned, indicating that businesses must prepare for the financial implications of these tariffs.
This evolving landscape underscores the increasing importance of trade credit insurance as a risk management tool for Canadian exporters navigating the uncertain waters of international trade. With the stakes higher than ever, companies are being urged to reconsider their insurance strategies to safeguard against the potential fallout from ongoing tariff disputes.
As the situation continues to develop, the focus on trade credit insurance may well redefine how Canadian exporters approach their international dealings, particularly with the U.S. The need for protection against insolvencies and payment defaults has never been more critical, and the rising inquiries reflect a shift in mindset among exporters who are now more aware of the risks involved in cross-border transactions.
In summary, the surge in interest for trade credit insurance in Canada is a direct response to the volatility introduced by Trump’s tariffs. As businesses brace for potential bankruptcies and payment disruptions, this insurance product may become a vital lifeline, ensuring that exporters can weather the storm of economic uncertainty and continue to thrive in a challenging global market.
