For many Canadian companies, the biggest barrier to using trade credit insurance isn’t cost, but perception. According to John Middleton (pictured), vice president, complex risk, trade credit, at HUB International, businesses often assume that setting aside provisions for bad debt – effectively self-insuring – is a sufficient safeguard against customer defaults.
That mindset, however, can leave growth potential on the table. Middleton stressed that too often firms view credit insurance as just another expense rather than a strategic enabler.
“They don’t think about what this is going to do for me to enhance my financing, or how can I leverage this to grow the top line and create more profit for my shareholders?” he said in an interview with Insurance Business.
Instead of treating accounts receivable coverage purely as risk transfer, Middleton encourages companies to think of it as a tool that strengthens their financial position. By protecting receivables, businesses can access better financing terms, increase sales with greater confidence, and expand profitably into new markets. In that light, he argued, self-insurance looks less like prudence and more like a missed opportunity.
The crux of the misconception, Middleton explained, is that companies see self-insurance as neutral – an unavoidable cost of doing business. In reality, choosing to self-insure means absorbing losses directly, without unlocking any of the advantages that a formal credit insurance policy can provide.
“The main benefits are going to be the enhanced financing and the ability to grow your sales,” he said. “Those are two financial metrics that you can specifically attribute to buying credit insurance.”
Middleton previously highlighted how these benefits materialize. By insuring receivables, companies can often secure up to 90% financing against those insured assets, instantly strengthening their balance sheet. This financing advantage can free up working capital and give firms more room to invest in growth.
But financing is only one dimension. Credit insurance also helps companies pursue diversification – a growing policy priority in Canada, where Ottawa has signed agreements designed to expand trade ties across Europe, Asia, and Latin America. With US tariffs adding uncertainty, Canadian businesses are increasingly encouraged to explore new markets. Insurers’ global databases, Middleton noted, give exporters the confidence to enter those regions by providing independent credit assessments of potential counterparties.
Risk management is the third pillar. For many organizations, the information advantage is as valuable as the indemnification itself. Having an external credit opinion on major customers allows companies to make sharper decisions and reduce uncertainty, replacing guesswork with data-driven assessments. As Middleton puts it, “Let’s get a third-party independent credit opinion on our key customers, because that information is useful for us in terms of growth of our business.”
Looking ahead, Middleton warned that shifting US tariff policies remain the biggest wild card shaping demand for trade credit insurance. Economic history offers cautionary lessons, he said, pointing to the 1930s as a period when protectionist measures had disastrous effects on global trade. While it is unclear how current policies will unfold, the risk is that tariffs could trigger higher rates of insolvency, credit downgrades, and widespread financial distress.
“From economics 101, tariffs are not really regarded as a good thing, so we have to be cognizant of that,” Middleton said. If more companies begin facing deteriorating credit quality, the case for credit insurance will become stronger, both as a defensive measure and as a way to maintain access to financing during volatile conditions.
For many firms, he suggested, the realization may come that risks once considered manageable – or covered by simple self-insurance – are now too significant to ignore. Rising uncertainty in global trade could therefore push more businesses to reevaluate their risk strategies, opening the door for broader adoption of credit insurance as a mainstream financial tool.
“If there's a higher rate of insolvency and more distress in the market, then I think that's going to create more interest in what we're doing, and that's going to create more opportunity. People are going to say, ‘hey, this is a risk that maybe we haven't thought about’ or ‘we've glossed over in the past, and maybe we need to put some more resources towards this,’” he said.
