Global insolvencies continue to rise

Corporate insolvencies in Switzerland have risen for the fourth time in a row, reaching a new record of more than 8,100 cases in 2024 (from +8 % in 2023 to +11 % in 2024). This indicates that the economic and financial fundamentals are not yet sufficient to avoid an extension of the catch-up process in corporate insolvencies that already took place in 2022 and 2023. Even if the special cases of company liquidations due to organizational deficiencies pursuant to Article 731b CO are excluded.

Relaxation in Switzerland from 2025

Allianz Trade expects moderate economic growth in Switzerland, although the strength of the Swiss franc is weighing on export-oriented companies. This will slow down the recovery in corporate insolvencies. A decline of around 1 percent is expected for 2025, while a decline of 8 percent is forecast for 2026. Nevertheless, the figures are likely to remain above the 2018-2019 level.

Global insolvency activity is accelerating

In the global insolvency forecast from February 2024, Allianz Trade already predicted a sharp increase in 2024 (+9 %) and a subsequent stabilization in 2025 (+0 %). The latest developments paint an even gloomier picture worldwide, with a forecast increase of 11 % (+2 percentage points, pp) for this year, followed by a peak in 2025 with a further increase of 2 % (+2 pp). Corporate insolvencies are not expected to stabilize at a high level until 2026.

The main driver of the expected global increase in 2025 is the USA with +12 % after 31 % in 2024. However, Russia (+16 %), China (+5 %) and Taiwan (7 %) in Asia and Germany (+4 %) and Italy (+4 %) in Europe are also contributing to the global increase. In France and the UK, insolvencies are already at very high levels following sharp rises in previous years and will weaken slightly in 2025 (-6 % in each case).

Double-digit growth in countries that account for more than half of global GDP

Global corporate insolvencies have already risen by 9% since the beginning of the year. The increase is broad-based across regions and sectors. Globally, the Allianz Trade Insolvency Index at the end of 2024 is expected to be 13% above the average for the years before the pandemic (2016-2019), but 11% below the level of the global financial crisis.

"This global rollercoaster ride in corporate insolvencies is partly due to continued subdued global demand, ongoing geopolitical uncertainty and uneven financing conditions," says Aylin Somersan Coqui, CEO of Allianz Trade Group. "But it can also be explained by the 'backlog' of insolvencies, as companies are no longer protected by the support measures introduced during the pandemic and the energy crisis. As a result, countries that account for more than half of global GDP will be affected by a double-digit increase in insolvencies in 2024. Two-thirds are likely to exceed the number of insolvencies before the pandemic this year. The construction, retail and services sectors are the hardest hit, both in terms of the frequency and severity of insolvencies."

Will lower interest rates bring a turnaround for companies?

While a gradual easing of monetary policy could bring some relief, it is not a panacea for struggling companies. Lower interest rates reduce borrowing costs, improve cash flow and increase profitability, but cannot fully compensate for the financial challenges companies are facing. "Although Switzerland has lowered its key interest rate before all other countries, it cannot expect a recovery in insolvencies until next year. This is partly due to the strong franc and partly to the ongoing economic uncertainties and global market conditions," says Jan Möllmann, CEO Allianz Trade Switzerland.

Source: www.allianz-trade.ch