Insurer Allianz Trade forecasts 21% rise in German insolvencies

Allianz Trade, the world's largest credit insurer, expects a significant increase in insolvencies in Germany this year, forecasting a 21% rise in bankruptcies to around 21,500 cases.

This follows a 22% rise last year and is expected to leave numbers some 15% higher than pre-coronavirus levels in 2019. Allianz Trade forecasts a moderate further increase of about 2% to approximately 22,000 cases by 2025.

Concerns are mounting over the high number of major insolvencies among companies with annual revenues of at least €50 million ($55 million). There have already been 40 such bankruptcies in the first half of the year, marking the highest figure for this period since 2015 and more than a third higher than the same period last year.

"When it crashes, it crashes hard," said Milo Bogaerts, head of Allianz Trade in Germany, Austria and Switzerland. He said that major insolvencies often have a domino effect on companies throughout the supply chain, potentially leading to further bankruptcies.

According to Allianz Trade, the cumulative turnover of major insolvencies in the first six months reached €11.6 billion, surpassing the total damage for 2023 by mid-year. The average turnover of these insolvent large companies was €290 million, an increase of 85%.

Bogaerts highlighted that the construction and retail sectors have been hit particularly hard, with some companies struggling to repay Covid loans or secure new financing.

The fashion retail sector has also faced ongoing difficulties due to consumer reluctance and high container freight rates.

Clinics are also facing challenges, with three of the seven major service sector insolvencies involving healthcare facilities, alongside tourism and IT service firms.-