Trade credit insurers are entering 2026 with a sharper focus on cash flow, buyer quality and sector exposure rather than headline economic growth, according to Lockton’s latest market update.
Lockton said 2025 was a stop-start year that reshaped the risk landscape. While global growth is expected to hold at around 2.9%, the pace remains modest. In Australia, activity is being supported more by private demand and capital expenditure, even as household spending and parts of the labour market soften.
At the same time, inflation is forecast to remain above the Reserve Bank of Australia’s target band for much of 2026, reducing the likelihood of rate cuts in the near term. This sustained cost pressure continues to weigh on interest-sensitive sectors such as construction, building materials and consumer durables.
“Risk is not escalating evenly. Pressure is building through cash flow, working capital and sector exposure rather than headline growth,” Lockton said. In other words, even if the broader economy appears stable, businesses may still face tighter liquidity and closer scrutiny of their customers’ financial strength.
Performance across sectors is becoming more uneven. Lockton highlighted that technology, artificial intelligence and data infrastructure are leading earnings growth, supported by strong capital spending and a data centre pipeline valued at more than $37 billion. Healthcare and pharmaceuticals are also holding up, backed by steady demand and public funding.
Parts of the supply chain linked to machinery and equipment, electricals, steel, HVAC and civil works may also perform relatively well, although project timing and concentrated counterparty risk remain factors to watch.
By comparison, the automotive sector continues to face pressure from electric vehicle transition costs, competition and tariff exposure. Mid-market businesses are dealing with tighter margins and higher debt servicing costs.
Insolvencies are still rising, but at a slower rate, which Lockton described as consistent with a late-cycle environment rather than a broad-based spike: “Credit stress is selective and sector-specific. Understanding buyer profiles matters more than relying on general market conditions.”
For 2026, insurer capacity remains available, but underwriting standards are tightening. Lockton said the structure of trade credit programs, sector positioning and the quality of buyer portfolios will play a larger role in how insurers assess risk in the year ahead.
