• Limited access to outside capital: Trade credit insurers have always been specialized insurance companies; besides the complexity of the product itself, high entry barriers and high sunk costs in establishing new ‘greenfield operations’ constitute big obstacles to potential competitors and to potential capital providers when it comes to financing the business. External sources of capital are therefore rare, so reinsurance can be considered being a suitable capital provider.

• High degree of specialization: The niche character of this business results in very few people having thorough knowledge about trade credit insurance outside of the insurance and reinsurance industry.

• Low diversification: Until 1990 trade credit insurers’ portfolios were largely focused on their domestic boundaries: a German trade credit insurer would insure almost only domestic trade credit in Germany, a French insurer only French trade credit, etc. These portfolios would to a great extent follow their own country's economic cycle. As a consequence, whatever economic downturns affected one country (e.g. crisis of construction sector in Germany), the credit insurer's portfolio would immediately be hit, resulting in very high loss ratios. With lack of outside capital sources, the only way to efficiently absorb such high loss ratios was by way of reinsurance.