• In 2023, 3 out of 4 countries recorded a rebound in business insolvencies, resulting in a +7% rise at the global level.
• 2024 might mark the end of the catch-up, with a third rise in a row in business insolvencies (+9%) driving 2 out of 3 countries above their pre-pandemic levels.
• After these gradual yet consecutive rises, global business insolvencies might stabilize in 2025 (0%) but settle at a high level.
• Insolvencies in South Africa have reached a record low, dropping by 13% year on year in 2023.

Paris, March 4, 2024: Allianz Trade releases today its latest Global Insolvency Report and unveils updated forecasts for 2024 and 2025. According to the world’s leading trade credit insurer, after two gradual rebounds in 2022 (+1%) and 2023 (+7%), global insolvencies are set to accelerate again in 2024 (+9%) before stabilizing in 2025 (0%) at high levels.

South Africa sees significant drop in insolvencies, but challenges remain

Insolvencies in South Africa have reached a record low, dropping by 13% year on year in 2023, according to the report. The decrease, which marks the lowest number of cases in over 30 years, is a positive sign for the country's economy.

Throughout the year, all quarters reported fewer insolvency cases compared to the previous year, indicating a consistent downward trend. However, the report predicts that the economic inertia experienced since 2022 will have lingering effects in 2024, resulting in a relatively stable number of insolvencies. It is expected that a moderate decrease will materialize again in 2025, driven by a substantial economic recovery.

The overall resilience of firms and the economy has been commendable, considering the challenges faced. South Africa's real GDP growth decelerated to 0.9% in 2023, a significant drop from the nearly 2% growth in 2022 and 5% in 2021.

One of the key obstacles hindering growth is the lack of reliable electricity supply and logistics networks, which have been identified as the country's top risk in the Allianz Risk Barometer. This ongoing issue continues to impede businesses and households from reaching their full potential.

Furthermore, the report warns that insolvencies may increase further due to the absorption of margins for interest repayment and potential business interruption events triggered by the potential recrudescence of social unrest related to the electoral cycle.

Despite the challenges, the significant reduction in insolvencies is a positive development for South Africa. It reflects the resilience and adaptability of businesses in navigating the economic landscape. As the country works towards addressing the underlying issues affecting growth, there is hope for a brighter future.

Insolvencies are (already) above pre-pandemic levels in most advanced economies

As expected, 2023 recorded a high-speed and broad-based rebound in business insolvencies and 2024 started with insolvencies above pre-pandemic levels in most advanced economies. The number of business insolvencies rebounded in three out of four countries in 2023, with most recording a double-digit increase. We saw sharp rises in the US (+40% in 2023) and in the Eurozone (+14%), with the Netherlands (+52%), France (+35%) and Germany (+23%) on the front lines.

“The increase in global insolvencies accelerated by +6 percentage points (pps) in 2023 compared to 2022, moderated only by the declines seen in China (-14%) and emerging markets such as South Africa (-13%) and India (-8%). Western Europe remained a key contributor to the global rise in business insolvencies despite a slight slowdown (+15% in 2023, -8 pps vs 2022). North America boosted the global rebound too, with a sharp acceleration (+41%, +43 pps). Another worrying factor is the rise in large business insolvencies[1], which could generate further non-payment risk for smaller suppliers: 2023 recorded one case per day globally (365),”explains Maxime Lemerle, Lead Analyst for insolvency research at Allianz Trade.

The global insolvency acceleration is not done yet, but the catch-up is coming to an end

Lower growth, trade disruptions and geopolitical uncertainty set the stage for another acceleration in global business insolvencies in 2024. Allianz Trade expects a third escalation in a row this year (+9%), fueled by a continuing increase in four out of five countries. The largest increases are expected in the US (+28%), Spain (+28%) and the Netherlands (+31%).

“This broad-based rise would push two out of three countries above their pre-pandemic number[2] of insolvencies in 2024, from half in 2023. The after-shocks economy brings a large set of headwinds and challenges. These will now test the resilience of corporates that have become the most fragile over the past 3 years. We expect that these developments will lead business insolvencies to settle at a high level in 2025: +12% above their 2019 level in the US, +8% in France and +6% in Germany,”states Aylin Somersan Coqui, CEO of Allianz Trade.

Allianz Trade Expects Limited Impact on Business Insolvencies

Allianz Trade, which operates in South Africa through the Allianz Commercial license, does not expect a tsunami of business insolvencies as recorded in the aftermath of the great financial crisis, when global insolvencies skyrocketed by +17% and +19% in 2008 and 2009, respectively. However, the catch-up should be noticeable in several countries, in particular the advanced economies of Europe, due to specific firms (the most exposed to profitability and financing issues) and specific sectors (notably B2C related sectors and construction).

Want to check all our insolvency forecasts and analysis? Take a look at our 2024 Allianz Trade Insolvency Report!

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About Allianz Trade

Allianz Trade is the global leader in trade credit insurance and a recognized specialist in the areas of surety, collections, structured trade credit and political risk. Our proprietary intelligence network analyses daily changes in +80 million corporates solvency. We give companies the confidence to trade by securing their payments. We compensate your company in the event of a bad debt, but more importantly, we help you avoid bad debt in the first place. Whenever we provide trade credit insurance or other finance solutions, our priority is predictive protection. But, when the unexpected arrives, our AA credit rating means we have the resources, backed by Allianz to provide compensation to maintain your business. Headquartered in Paris, Allianz Trade is present in 52 countries with 5,500 employees. In 2022, our consolidated turnover was € 3.3 billion and insured global business transactions represented € 1,057 billion in exposure. For more information, please visit allianz-trade.com

Cautionary note regarding forward-looking statements

The statements contained herein may include prospects, statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such forward-looking statements. Such deviations may arise due to, without limitation, (I) changes of the general economic conditions and competitive situation, particularly in the Allianz Group’s core business and core markets, (II) performance of financial markets (particularly market volatility, liquidity and credit events), (III) frequency and severity of insured loss events, including from natural catastrophes, and the development of loss expenses, (IV) mortality and morbidity levels and trends, (V) persistency levels, (VI) particularly in the banking business, the extent of credit defaults, (VII) interest rate levels, (VIII) currency exchange rates including the euro/US-dollar exchange rate, (IX) changes in laws and regulations, including tax regulations, (X) the impact of acquisitions, including related integration issues, and reorganization measures, and (XI) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.

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[1] Firms with an annual turnover exceeding EUR50mn

[2] (2016-2019 average)