+9% global insolvencies in 2024

Johan Geeroms, our Director of Risk Underwriting Benelux, talks about the situation in Belgium: "A limited increase of 6% is still expected this year. But bankruptcies are expected to fall by 5% between now and 2025.

This reduction in the number of bankruptcies will be less significant in Belgium than in other countries, because aid during the coronavirus crisis was less extensive than in the Netherlands, for example.  As a result, Belgium was hit hard by bankruptcies as early as 2022 (+42%), whereas the Netherlands was only confronted with this phenomenon in 2023 (+52%) and 2024 (+31%). The number of start-ups in Belgium has also increased by 14%, but for them, 2024 will be a real test year in terms of resistance and resilience.

On the other hand, purchasing power in Belgium has been maintained thanks to automatic wage indexation. Consumption has therefore not been affected, but the impact will be felt later, due to a deterioration in competitiveness. GDP growth in 2023 was also higher on average in Belgium than in the other EU countries.

Johan Geeroms also notes that SMEs have become more vulnerable in recent years. "Supply costs have risen, but are not passed on to customers for competitive reasons. This is to the detriment of their margins.

The acceleration in the global loss ratio is not yet over, but the catch-up effect is coming to an end. The +9% escalation this year is due to the slowdown in growth, trade disruptions and geopolitical uncertainty. The biggest rises are expected in the United States (+28%), Spain (+28%) and the Netherlands (+31%).

"This generalised increase would lead two out of three countries to exceed the number of pre-pandemic failures in 2024, compared with one out of two countries in 2023. The post-shock economy brings with it many headwinds and challenges. These will now test the resilience of those businesses that have become most fragile over the past three years. We expect these developments to lead to business insolvencies stabilising at a high level in 2025: +12% from their 2019 level in the US, +8% in France and +6% in Germany," says Aylin Somersan Coqui, CEO of Allianz Trade.

Allianz Trade does not expect a tsunami of business insolvencies such as that seen in the aftermath of the great financial crisis, when global insolvencies soared by 17% in 2008 and 19% in 2009. However, the catch-up is likely to be marked in several countries, particularly the advanced economies of Europe, due to sensitive businesses (those most exposed to profitability and financing issues) and specific sectors (notably B2C-related sectors and construction).

We have identified 4 challenges for companies in the coming years:

1. Profitability is set to tighten
2. Before they can take advantage of the global recovery looming in 2025, businesses will have to manage the slowdown in global demand. Specifically, the eurozone and the United States would both need +0.7pp of additional GDP growth on average in 2024-2025 to stabilise their number of insolvencies.
3. Increased risk of non-payment
4. Companies are facing growing uncertainty. Global geopolitical tensions play a major role in this. They are also increasingly faced with payment defaults. And in addition to the conflicts in Ukraine and Gaza, 2024 will be a busy year for elections. Countries representing 60% of the world's GDP will go to the polls. A series of factors that will only add to the climate of uncertainty surrounding an already shaky economy. Against this backdrop, drawing up accurate forecasts and business plans will be a huge challenge for many companies.
5. In addition, regulation is also on the rise, which could force businesses to make additional costly efforts to comply. Our non-payment risk index, based on our own credit exposure, shows that businesses are increasingly concerned about non-payment, with the index at its highest level since 2022.
6. Financing and liquidity conditions remain tight
7. Businesses will continue to face the challenge of costly financing, fuelling concerns about their ability to absorb borrowing costs and ease the pressure on overall profitability. At the same time, the limited availability of finance will put the most exposed sectors and businesses at risk, while the number of fragile businesses remains high in the UK (15%), France (14%), Italy (9%) and Germany (7%).
8. New businesses will face their first real test of resilience
9. After the coronavirus period, a relatively large number of new businesses were created. This explains the increase in the bankruptcy rate. Not all new businesses survive, far from it.
10. In Europe, the registration of new businesses has been shown to be +14% higher in 2021-2023, compared to 2016-2019. For these businesses, 2024 will be the first 'real' test of resilience, particularly in the countries that have seen the most recent business start-ups, notably France (+47%), the Netherlands (+28%) and Belgium (+14%).