After two years of decline, global insolvencies to rise by 15% in 2022

  • Thanks to massive state intervention, global insolvencies decreased in 2020 (-12%), and will continue to do so in 2021 (-6%). Allianz Trade expects global insolvencies to rise by +15% in 2022, but still at a low level (-4% compared to pre-crisis figures)
  • Most Asian countries will post higher insolvencies in 2022 (+18% y/y for the region). China, Singapore and Hong Kong will see 11%, 7% and 3% more business insolvent respectively
  • The US will be an exception in the global landscape, keeping insolvencies at a low level in 2021 and 2022; Europe will see mixed trends while emerging markets should be watched very closely

Hong Kong, 6 October 2021 – Since 2020, state support measures have helped most economies avoid a large wave of business insolvencies despite the historic economic shock caused by the Covid-19 crisis. But will their gradual withdrawal spark a resurgence in the coming months? Allianz Trade’ economists investigate in their latest report.


Global insolvencies on the rise, but still at a lower level than in 2019

Global insolvencies decreased in 2020 (-12%) and will continue to do so in 2021 (-6%) as the extension of many state support measures in a context of generally accommodative monetary policy is helping to manage the pressure on companies’ liquidity and solvability.

“Looking at insolvency levels, governments succeeded in helping companies face the crisis: massive state intervention prevented one out of two insolvencies in Western Europe and one out of three in the US in 2020. Their extension will keep insolvencies at a low level in 2021, but what happens next depends on how governments act in the coming months”, said Maxime Lemerle, Head of Sector and Insolvency Research at Allianz Trade.

According to Allianz Trade, the withdrawal of support measures for companies sets the stage for a gradual normalization of business insolvencies. The world’s leading trade credit insurer expects global insolvencies to post a +15% y/y rebound in 2022, after two consecutive years of decline. But with a fine-tuned and step-by-step removal, the return to pre-crisis insolvency levels will take longer: global insolvencies in 2022 will remain -4% below 2019 levels.


The US and Asia could take longer to see a resurgence compared to Europe and emerging markets

After a noticeable decline in 2020-2021 due to the faster exit from the pandemic and the corresponding economic recovery, most Asian economies will post higher insolvencies in 2022 (+18% y/y for the region). India in particular will see a strong surge (+69% y/y) due to the specific duration of the suspension of courts over 2020-2021. However, while most countries will return to the ‘natural’ number and trend in insolvencies related to their business demographics and economic outlooks, the region overall will still record less insolvencies in 2021 than in 2019, unless a prolonged resurgence of the virus continues to disrupt ports, plants and supply chains.

“The overall picture for Asia Pacific is hiding some diverging trends across economies which are due to uneven exits from the pandemic and uneven magnitude of support measures to companies. China, Japan and South Korea will remain stand out with fewer insolvencies in 2021 than 2020 (-10%, -23% and -18% respectively). Meanwhile, Hong Kong (+24%) and Singapore (+8%) are to register a higher increase as soon as 2021, despite absolute number of cases are low. To this regards, we expect all major economies in Asia Pacific to post a higher number of insolvencies in 2022,” added Mr Lemerle.


Five indicators that will shape how insolvencies evolve in the coming months

Allianz Trade has identified five factors that will set the tone of the path ahead for global insolvencies:


  • The global momentum of the economic rebound, which will be decisive for the pace of removal of state support measures, and in turn impact the pace of business insolvency normalization: most advanced economies should see GDP growth above the +1.7% required to stabilize insolvencies in 2021-2022. As a reminder, Allianz Trade estimates that global GDP will grow by +5.5% in 2021 and +4.2% in 2022;
  • The pace of withdrawal of state support, since it will also influence the cash burning dynamic of companies;
  • This point is even more important as many fragile companies will still be at high risk of default, notably the pre-Covid-19 ‘zombies’ kept afloat by emergency measures and the companies weakened by extra indebtedness from the crisis;
  • The deterioration of companies’ financials, which is adding to debt sustainability issues; and
  • The quick recovery of business creation, since the increase in the number of businesses will mechanically increase the base for potential insolvencies, particularly in sectors where creation is highly related to meeting new needs arising from the pandemic (i.e. home delivery) but with uncertain viability.